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Canada Inflation Rate – BOC Stance on Interest

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Market News – Tiff Macklem, the Governor of the Bank of Canada, has stated that the current inflation rate is too high. However, he also noted that there are clear indications that aggressive hikes in interest rates are starting to decrease demand.

The policymakers are worried as they aren’t observing a downward trend in the core inflation measures. Macklem emphasized that their main focus is on understanding how a slowing economy will impact future inflation.

Macklem explained, “Our concern isn’t just about the current state of inflation, but where it’s headed.” He reiterated that they are closely monitoring factors such as excess demand, inflation expectations, wages, and corporate pricing.

Speaking from Marrakech, Morocco, where the International Monetary Fund and World Bank meetings are being held, Macklem stated, “Inflation is still too high and widespread.”

In the second quarter, Canada’s economy shrank. Households burdened with debt are feeling the effects of a sharp rise in borrowing costs. Macklem pointed out clear signs that monetary policy is effectively balancing demand and supply.

Due to further evidence of a weakening economy, Macklem and his governing council decided to keep the overnight rate steady at five per cent during their September meeting. However, they haven’t ruled out the possibility of further tightening measures to quell any expectations for rate cuts. The central bank’s next decision on rates will be made on Oct. 25.

  • 14 October 2023
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