BOC’s Macklem: Canada's inflation remains too high, more rate hikes needed

“Canadian inflation remains high and broad-based and more interest-rate increases will be needed to cool the overheating economy,” said Bank of Canada (BOC) Governor Tiff Macklem in a testimony at the House of Commons late Wednesday, reported Reuters.

Additional comments

We expect our policy rate will need to rise further.

How much further policy rates would need to rise will depend on how monetary policy is working to slow demand.

Inflation in Canada remains high and broad-based, reflecting large increases in both goods and services prices.

We have yet to see a generalized decline in price pressures.

Canadian economy is still in excess demand and it’s overheated.

Higher interest rates are beginning to weigh on growth.

Effects of higher rates will take time to spread through the economy.

Expect growth will stall in the next few quarters; once we get through this slowdown, growth will pick up.

We are trying to balance the risks of under- and over-tightening.

The tightening phase will come to an end, and we are getting closer, but we are not there yet.

with inflation so far above our target we are particularly concerned about the upside risks.

BOC balance sheet peaked in March 2021 at CAD575bn, as of last week it was around CAD 415bn, a drops of around 28%.

There is a risk that inflation in Canada is more embedded, more entrenched; also some possibilities that inflation could come down faster.

Expecting to see businesses pass on input price decreases as quickly to consumers as they did with increases on the way up.

USD/CAD bears take a breather

USD/CAD remains sidelined, actually bouncing off the intraday low to 1.3355, despite the hawkish comments from BOC’s Macklem.

Also read: USD/CAD tumbles toward 1.3350 after the Fed released dovish minutes

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.