Higher interest rates are ‘painful’ but ‘worth it’, Bank of Canada’s Macklem says

Bank of Canada president says central bank’s 2 per cent inflation target ‘now in sight’ but warns lingering price pressures may require further interest rate hikes .

Tiff Macklem made the remarks to the Calgary Chamber of Commerce on Thursday, a day after the central bank opted to hold its benchmark interest rate steady for only the third time this year.

According to a prepared copy of his speech, Macklem told the a*sembled business leaders that the Bank of Canada’s efforts to control inflation through tight monetary policy were working, but that the board of directors of the central bank is increasingly concerned about the slowdown in the momentum of the fight against inflation.

“Our 2% target is now in sight,” Macklem said.

“But we’re not there yet and we fear that progress is slowing down. Monetary policy still has work to do to restore price stability for Canadians, and we are determined to stay the course.

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The Governor of the Bank of Canada also admitted to the crowd that getting back to the 2 per cent target was difficult. He pointed out that much of Canada’s annual inflation rate is currently being driven by rising mortgage costs linked to the bank’s own rate hikes, but argued that without tighter monetary policy, “the inflation in the whole economy would be a much bigger problem for everyone”.

“Higher interest rates are painful. But hitting the 2 percent target is worth it,” Macklem said.

Annual inflation reached 3.3 percent in July, half a percentage point higher than the previous month.

Macklem said monetary policy could be “tightly enough to restore price stability”, but warned that slowing downside momentum in underlying inflationary pressures could leave annual price increases stalled. above 2 percent.

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“We are convinced that 2% is the right target,” he said.

“We have to stay the course.”

More soon.

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