The Bank of Canada has not ruled out another oversized interest rate hike to fight inflation, governor Tiff Macklem said. Read more
The Bank of Canada surprised markets with a smaller-than-expected 50-basis point increase last week, lifting the policy rate to 3.75 per cent. It also forecast the economy would stall over the next three quarters.
Inflation, meanwhile, has eased to 6.9 per cent from a peak of 8.1 per cent, but it is still far above the central bank’s 2 per cent target and underlying price pressures remain broad-based.Article content“It’s been a long time since we had high inflation and we’re rediscovering that it corrodes the social fabric,” he added. “It makes people angry. People feel ripped off. And that’s one of the big problems with inflation and it’s an important reason why we got to get it back down.
“How much further will depend on how monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding to this tightening cycle,” Macklem said. “The effects of higher rates will take time to spread through the economy. … There are no easy outs to restoring price stability.”
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