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Interest rate hikes depend on “fundamental uncertainties,” Bank of Canada governor warns

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The Bank of Canada’s rapid-fire interest rate hikes are starting to slow the economy, Governor Tiff Macklem said on Monday during his end-of-the-year speech. And while the bank wants to avoid a recession, there is a risk that sticky inflation will require “much higher” rates, Macklem warned.

Speaking to business leaders in Vancouver and reflecting on the past year, Macklem said the tightening had “begun to work” but would take time to feed through the economy. “We are resolute in our commitment to return inflation to the two per cent target,” he added.

“Decisions to raise the rate or to pause and assess the impact of past rate increases will depend on incoming data and our judgments about the outlook for inflation,” Macklem reiterated in his remarks. “These are fundamental uncertainties we’ll need to confront in the years ahead.”

The bank lifted rates at a record pace of 400 basis points over nine months to 4.25 per cent — a level last seen in January 2008 — to tame inflation that stood at 6.9 per cent in October. That is more than three times the central bank’s target of two per cent.

For more info, please go to https://globalnews.ca/news/9341825/bank-of-canada-tiff-macklem-speech-dec-12/

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Category
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Tags
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