Macklem: We Don't Need More Excess Supply

Q: You spoke about increasingly having to balance upside and downside risks, does the emphasis on balance imply the need for rates to fall relatively quickly and how much of a risk are mortgage renewals?

A: Two arguments. Symmetric nature of inflation targeting framework. When it was high and above the 1-3% band we were naturally more concerned about upside risks. We’re now back in the band and our own forecast has inflation continuing towards the 2% target so we need to be more symmetric.

Second element is where the economy is right now, in excess supply and slack in the labour market. There is enough excess supply in the economy to bring inflation back to the 2% target, we don’t need more excess supply. We need growth and job creation to start picking up to absorb excess supply and bring inflation back sustainably to target.