After delivering a quarter-point increase in late January, the bank announced a “conditional pause” to further rate hikes
“If new evidence begins to accumulate that inflation is not declining in line with our forecast, we are prepared to raise our policy rate further,” Mr. Macklem told a Quebec City audience on Tuesday, according to the English text of the speech. “But if new data are broadly in line with our forecast and inflation comes down as predicted, then we won’t need to raise rates further.”
The bank’s latest forecast shows the annual rate of inflation slowing to around 3 per cent by the middle of the year, and reaching 2.5 per cent by the fourth quarter. Much of Mr. Macklem’s speech focused on how monetary policy works: that interest rate changes take time to have a full impact on economic growth and inflation. Rate increases hit the housing market first, then squeeze consumer spending and business investment over time as debt-servicing costs rise.
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