BoC’s Macklem: There is little downward momentum in underlying inflation
|Tiff Macklem, Governor of the Bank of Canada mentioned on Thursday that monetary policy “may be sufficiently restrictive to restore price stability” but warned the Governing Council “is concerned about the persistence of underlying inflation.” On Wednesday, the BoC kept its key interest rate unchanged at 5%.
Speaking before the Calgary Chamber of Commerce, Macklem added that they are prepared to raise rates further, if they have to, in order to “restore price stability”. After reading his remarks, the Governor will take questions from reporters.
Key takeaways from the speech:
We’ve come a long way in the past year. Monetary policy is working, and inflation is coming down. But we still have some way to go to restore price stability. With past interest rate increases still working their way through the economy, monetary policy may be sufficiently restrictive to restore price stability. However, Governing Council is concerned about the persistence of underlying inflation. Inflation is still too high, and there is little downward momentum in underlying inflation.
We will be carefully assessing the balance between demand and supply and underlying inflation to gauge progress toward price stability. If we need to raise interest rates further to restore price stability, we are prepared to take further action. But we don’t want to raise our policy rate more than we have to.
We know higher interest rates are hitting some Canadians hard, and we don’t want this to be any harder than necessary. But letting too-high inflation persist would be worse. We are confident that 2% is the right target. The target is now in sight. We need to stay the course.
Market reaction
The USD/CAD remained relatively steady hovering around 1.3670, on its way to the highest daily close in months.
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