Bank of Canada governor Tiff Macklem says central banks face an increasingly difficult job as the country faces a maelstrom of potential U.S. tariffs, technological disruptions, extreme weather and global political upheaval.
"President Donald Trump’s threats of new tariffs are already affecting business and household confidence, particularly in Canada and Mexico," said Macklem.
Monetary policy can help mitigate the short-term impacts of tariffs, but can't address every challenge facing an economy, Macklem said."Significant, broad-based tariffs will sharply reduce demand for our exports. At the same time, a weaker exchange rate, retaliatory tariffs and supply chain disruptions will raise import prices, putting upward pressure on inflation.
Macklem said the world is increasingly vulnerable to shocks amid higher long-term interest rates, slower economic growth, war and rising trade protectionism, as well as the rise of artificial intelligence technology and more frequent catastrophic weather events."In a world with more structural change and more negative supply shocks, central banks will be faced with harder choices. And harder choices bring risks of public disappointment and frustration," he said.
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