The Bank of Canada expects to see a clear pullback in inflation by the spring, but it isn't taking any chances in its efforts to get the inflation rate back to two per cent, said governor Tiff Macklem on Monday.
Tiff Macklem, Governor of the Bank of Canada is seen at the Bank of Canada in Ottawa, on Wednesday, Oct. 26, 2022. Macklem is expected to make an end of the year speech this afternoon. THE CANADIAN PRESS/Sean Kilpatrick
“When snow melts, when we get to the spring, we should see much clearer evidence that inflation is moving down,” he said at the press conference following a year-end speech. The bank has moved forcefully on rates this year, including last weeks’ rate hike which was higher than some expected, because the risk of not doing enough is greater than going too far, Macklem said.
Russia’s invasion of Ukraine not only sent energy prices and inflation higher, it also underscored the vulnerability of the world to interconnected trade, which is helping accelerate a push toward more protectionism and narrower trade that could reduce efficiencies and further put pressure on prices.
In the shorter term, though, rate hikes could have a faster effect because of the high debt loads Canadians are carrying, with each rate hike adding increased pressure. In response, the Bank of Canada has boosted its data-gathering and listening capabilities on several fronts to keep a more granular view of what’s going on with things like supply chains and what kind of knock-on effects there are when parts or supplies are delayed, he said.
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