Macklem On Pausing Once Getting Closer To Neutral

USDCAD sitting near session lows at 1.2603 but also on move with weaker USD.

Key takeaways from Governor Macklem in BOC conference so far:
Q: Moving forcefully is interpreted by markets as 50bp hikes, is that fair?
A: I’m going to let our words speak for themselves. Yes, we are prepared to move as forcefully as needed to get inflation back to target. We took an important step this morning. It’s clear we have more work to do.

On newly revised neutral range and moving towards it: Yes we do think there will be a need to get closer to the neutral rate. From there probably need to be more humble and appropriate to pause once closer to neutral at least for a period, but equally we might have more work to do. We will be watching closely how the economy responds to rates and are aware that household indebtedness is high which could mean that the effect of rates will be pronounced but households have saved more through the pandemic.

Budget impact: The latest budget isn’t incorporated into our projection but the net new measures in the budget are about C$30B over the next five years. That is certainly a positive impulse but it’s not on a scale that would materially affect our projections.