In his year-end speech, Governor Tiff Macklem reiterated that the central bank has entered a new phase of monetary policy, considering a pause in rate increases
Bank of Canada Governor Tiff Macklem said that higher interest rates are starting to slow the economy and lower inflation, but that the bank remains cautious about doing too little to bring prices under control.
“If we raise rates too much, we could drive the economy into an unnecessarily painful recession and undershoot the inflation target,” he said at the event hosted by the Business Council of British Columbia. Bank of Canada Governor Tiff Macklem conducts an end of year fireside chat with the Business Council of British Columbia, in Vancouver, British Columbia, Canada, December 12, 2022. REUTERS/Jennifer GauthierThe bank’s next rate announcement is on Jan. 25. Mr. Macklem said the decision about whether or not to pause rate hikes, “will depend on incoming data and our judgments about the outlook for inflation.
“Since we started inflation targeting in the early 1990s, we have not been hit by large negative supply shocks at the same time as our economy was overheating,” he said.“The lesson from 2022 is that even if long-term inflation expectations are well anchored, when the economy is in excess demand, businesses raise their prices more quickly and by more when their costs increase.”
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