Governor Tiff Macklem offered more insight into the Bank of Canada’s decision to deliver a jumbo interest-rate cut last week, saying the easing makes sense given how aggressively it hiked borrowing costs to rein in price pressures in recent years.
Erik Hertzberg, Bloomberg NewsThe Bank of Canada is expected to cut interest rates once again this week. It seems the bank's recent cuts are already having an effect on the housing market.
Speaking at an event in Toronto hosted by technology publication The Logic on Monday, Macklem pushed back on suggestions that larger than quarter-point reductions in interest rates need only coincide with emergencies or times of economic stress. Macklem also said the central bank will have to “discover” the neutral rate — the theoretical level of borrowing costs that neither stimulate nor restrict the economy — as it eases monetary policy.
The comments suggest that while officials are set on continuous reductions in borrowing costs, there’s no predetermined path, and they remain uncertain about exactly where interest rates are headed in Canada. It’s one of the first times Macklem has signaled that the central bank may end up searching for an endpoint as they normalize rates further.
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