Bank of Canada governor Tiff Macklem says that although a slowing economy may not seem like a good thing, it is when the economy is overheated.
to cool the economy as elevated borrowing costs are constraining spending on big-ticket items such as vehicles, furniture and appliances.“That doesn’t sound like a good thing, but when the economy is overheated, it is,” he said.To slow the economy domestically, the Bank of Canada has embarked on one of the fastest monetary policy tightening cycles in its history. It has hiked its key interest rate eight consecutive times since March, bringing it from near-zero to 4.5 per cent.
“Typically, we don’t see the full effects of changes in our overnight rate for 18 to 24 months,” Macklem said Tuesday. However, the governor said the Bank of Canada will be ready to raise rates further if inflation proves to be more stubborn than expected. For inflation to get back to two per cent, Macklem said wage growth will have to slow, along with other prices.
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