Close X
Saturday, October 5, 2024
ADVT 
National

Bank of Canada may need to raise rates again, despite this week's hold: Macklem

Darpan News Desk The Canadian Press, 07 Sep, 2023 04:10 PM
  • Bank of Canada may need to raise rates again, despite this week's hold: Macklem

The Bank of Canada may have to raise interest rates further, given that inflation may stay high for some time, said governor Tiff Macklem Thursday.

His speech at the Calgary Chamber of Commerce came one day after the central bank decided to hold its key interest rate steady at five per cent as signs of an economic slowdown grow.

Statistics Canada reported last week that the economy shrank in the second quarter, while the unemployment rate has been rising for three consecutive months.

However, Macklem said on Thursday that the central bank’s governing council agreed rates may need to rise again.

“In trying to balance the risks of under- and over-tightening, the governing council decided yesterday to keep the policy rate at five per cent and agreed there may be a need to raise the policy rate further if inflationary pressures persist,” Macklem said.

Canada’s inflation rate was 3.3 per cent in July, but the Bank of Canada expects inflation to flare up in the coming months before declining again.

Macklem also held a news conference Thursday, where he faced questions from reporters about the central bank's political independence in light of comments from elected officials on its policy decisions. 

Finance Minister Chrystia Freeland faced some criticism Wednesday for appearing to praise the central bank for holding its key rate, saying in a statement that the decision was "welcome relief for Canadians."

Later that day, the NDP — which has been critical of the rate hikes — went further, suggesting the finance minister should ask the Bank of Canada to stop raising interest rates.

Macklem said elected officials are clearly hearing from constituents about the pain high inflation and rising interest rates are causing. The central bank is hearing the same thing, he said. 

The governor wouldn't comment on what he would do if the finance minister ever issued a directive to the central bank regarding interest rates — something that's never happened in the Bank of Canada's history but is within the powers of the minister.

"I think the deputy prime minister has been very clear that she fully respects the independence of the Bank of Canada," Macklem told reporters.

As the central bank focuses on its task of wrestling inflation back down to two per cent, the governor spent a considerable amount of time in his speech defending the central bank's inflation target. Although inflation may seem close to two per cent, he said, reaching two per cent is crucial to maintaining predictability and stability in the economy.

The governor said the slowing progress on getting inflation down either means previous rate hikes need more time to take effect, or interest rates aren’t high enough yet.

The central bank is looking for evidence that inflation is not only falling, but that large price increases are becoming less common across the economy.

For that to happen, Macklem said demand in the economy needs to continue slowing.

“But I want to be clear – we are not trying to kill economic growth,” Macklem said.

Instead, the governor said the best way the central bank can support the economy is by making sure inflation comes back down to the two per cent target.

When asked whether Canada is already in a recession, Macklem said he doesn't think so. 

As to whether the country is headed for one, Macklem said Canada may experience two consecutive slightly negative quarters of growth, which would meet the technical definition of a recession. 

"I don't think a couple of very small negatives are what most people think of when they think of a recession. It's not a big contraction in output. It's not a large rise in unemployment," he said. 

 

MORE National ARTICLES

Teen arrested over string of attacks in Vancouver

Teen arrested over string of attacks in Vancouver
The 15-year-old boy from Vancouver was arrested Saturday night after three people were hurt in separate assaults that evening. Police say a 57-year-old man called 911 to say he was chased along the seawall near the Olympic Village by the teen, who repeatedly punched and kicked him.

Teen arrested over string of attacks in Vancouver

Vancouver Police find 51 year old woman dead inside a Mount Pleasant apartment

Vancouver Police find 51 year old woman dead inside a Mount Pleasant apartment
VPD responded to reports of a disturbance inside a building near Ontario Street and First Avenue around 2:30 a.m. on May 1. When officers arrived, they found the victim suffering from fatal stab wounds. She died on scene.    

Vancouver Police find 51 year old woman dead inside a Mount Pleasant apartment

Vancouver City Savings Credit Union experiencing technical problems

Vancouver City Savings Credit Union experiencing technical problems
Vancity Credit Union is asking that customers be patient while the organization resolves the issue of debit cards being declined. The Credit Union also reached out to its customers regarding intermittent system-wide problems in a Twitter post on Sunday.

Vancouver City Savings Credit Union experiencing technical problems

B.C. PharmaCare expands coverage, adds medications

B.C. PharmaCare expands coverage, adds medications
The drugs treat conditions including ulcerative colitis and Crohn's disease, severely low blood sugar, migraines, low white blood cell levels, multiple sclerosis and heart failure.

B.C. PharmaCare expands coverage, adds medications

B.C. tables law to fight racism, discrimination

B.C. tables law to fight racism, discrimination
Premier John Horgan says in a statement B.C. is shaped by the diversity of its people, but systemic racism and colonialism have had long-lasting effects of unfairly holding people back for education, employment, housing and other issues.

B.C. tables law to fight racism, discrimination

Vancouver Police say suspicious device responsible for delaying the start of the BMO Vancouver Marathon

Vancouver Police say suspicious device responsible for delaying the start of the BMO Vancouver Marathon
A marathon volunteer spotted the device shortly after 5 a.m. Sunday and promptly called 9-1-1. Vancouver Police cordoned off the area, and bomb technicians from VPD’s Emergency Response Team were deployed to examine and destroy the device.

Vancouver Police say suspicious device responsible for delaying the start of the BMO Vancouver Marathon