Bank of Canada’s interest rate hikes are working to tame inflation: Tiff Macklem – National | Globalnews.ca

bank of canada monetary policy is working with the intention of dealing inflationthe governor says tiff mcallemIn form of Central bank preparing to stop its offensive Rate of interest increase.

Canada’s monetary policy chief says economic signs are showing growth is discouraging Canadians from spending, reducing demand and price pressures a year after inflation rose to a four-decade high. Is.

While global factors such as a reduction in supply chain disruptions have played a role in moderating prices in recent months, he points to the central bank raising its policy rate by 4.25 percentage points in the past year and the ensuing impact on inflation. .

Headline inflation peaked at 8.1 percent in June of 2022, with the most recent figures for December showing annual price growth has eased to 6.3 percent.

“With inflation above 6 percent, we are still a long way from the 2 percent target,” McCallum said Tuesday. “But inflation is turning the corner. Monetary policy is working.”

McCallum made his remarks, primarily in French, during a speech to a business audience in Quebec City. An English transcript of his prepared remarks was posted online.

He reiterated the central bank’s forecast that economic growth would be essentially zero over the next three quarters – risking a possible recession in Canada, but effectively relieving “inflationary pressures”.

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Higher interest rates have “controlled” household spending, he said, especially in sectors such as housing that are sensitive to rate changes.

The bank’s preferred measure of core inflation remains stuck around the five percent mark annually, he said, but projections for the shorter three-month period suggest the figure will slide below that bar in the coming months.

McCallum said there are also signs that Canada’s tight labor market is starting to ease and expectations from Canadian businesses show they are not baking higher inflation into their long-term pricing plans.

But while goods prices have fallen from earlier highs, a possible stagnation in services inflation is one of the biggest risks to the Bank of Canada’s inflation outlook, which sees inflation falling to three per cent by mid-year.

McCallum said potential volatility in global energy prices – a key factor driving inflation into 2022 – is also a risk the Bank of Canada is watching closely.

Accordingly, while announcing the plan of the Central Bank stop its rate increases last month To allow its hike to work its way through the economy, McCallum reiterated on Tuesday that the bank is prepared to “act with force” and raise rates if data shows inflation is not declining in line with its forecast. Will continue

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