© Reuters. FILE PHOTO: Bank of Canada Governor Tiff Macklem takes part in a news conference after announcing an interest rate decision in Ottawa, Ontario, Canada April 12, 2023. REUTERS/Blair Gable
SAO PAULO (Reuters) -Bank of Canada Governor Tiff Macklem reiterated on Friday it is far too early to be thinking about interest rate cuts, adding that he expects the consumer price index to decline to around 3% this summer and back to the bank’s 2% inflation target around the end of 2024.
Macklem told a seminar hosted by Brazil’s central bank that the Canadian monetary authority has been using a pause in interest rate increases to assess whether policy has been tightened enough to get inflation back to 2%.
Canada last hiked rates in January, holding its benchmark rate at 4.5% since then, despite saying it would be ready to hike again if inflation risks remain significantly above target.
Macklem also said at the event that he does not expect a recession to happen in Canada, forecasting as a base-case scenario a few quarters of slower but positive growth, even though he acknowledged that risks exist.
“So far, Canadians are proving resilient,” the central bank governor said, pointing out that delinquencies on mortgages remain low.
Stephen Macklem, Governor of the Bank of Canada (BoC), stated today that it is far too early to consider an interest rate cut, citing the present economic environment as a largely positive one.
The Bank of Canada’s key interest rate, also known as the target rate, has remained constant at 1.75 percent since last October, when the BoC increased rates for the fifth consecutive time. This comes as a somewhat surprise to analysts, who had expected a rate hike in light of low unemployment, firm economic growth, and fairly stable inflation levels.
In a recent press conference, Governor Macklem explained his stance on rate cuts, stating: “The goal of monetary policy is to keep the economy operating close to its potential. With that in mind, the Bank of Canada’s stance remains that it is far too early for the bank to consider any moves towards cutting interest rates”.
Macklem continued to emphasize his commitment to the bank’s current stance of keeping rates unchanged, saying “At this time, the bank feels that maintaining the current stance on interest rates is the best way to preserve the positive economic environment Canadians are currently experiencing”.
This recent update from the Governor of the Bank of Canada reiterates the BoC’s commitment to preserving a largely positive economic environment as the country continues to move forward. With the bank’s key interest rate remaining steady, it appears highly unlikely that a rate cut will be on the table in the near future.