Macklem doubles down on message that Canadians should prepare for higher interest rates
The Bank of Canada is prepared to raise interest rates “forcefully if needed” to get inflation under control, Governor Tiff Macklem said Wednesday, doubling down on the message that Canadian households and businesses should brace for higher borrowing costs over the coming year.
“We need to cool growth to cool inflation. We don’t want to overcool the economy, but we don’t want it overheating and creating inflation. So yes it’s going to be delicate,” he said. The bank’s campaign to normalize borrowing costs after two years of ultra-accommodative monetary policy still has a ways to go. Mr. Macklem has said several times in recent weeks that the bank intends to bring the overnight rate back to between 2 and 3 per cent relatively quickly. How fast and how high interest rates move will ultimately depend on how the economy reacts.
Borrowing costs for Canadian households have already begun moving higher, with variable rate mortgages moving in lockstep with the bank’s policy rate, and fixed-rate mortgages – which track government bonds – moving higher as bond investors have begun pricing in a more aggressive rate hike path from the central bank.
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