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MNI: BOC’s Macklem Opens The Door To Rate-Cut Debate

Source: Bank of Canada

Bank of Canada Governor Tiff Macklem opened the door to debating lower interest rates in a speech Friday by saying that discussion will happen when it’s clear that price stability is being restored.

“Once Governing Council is assured that we are clearly on a path back to price stability, we will be considering whether and when we can lower our policy interest rate,” he said.

The return to the Bank’s 2% inflation target “is now in sight,” he said, “and while we’re not there yet, the conditions increasingly appear to be in place to get us there.” The remarks also dropped the phrase from the Dec. 6 rate decision saying officials are prepared to hike for an 11th time if needed, though Macklem remained cautious about declaring victory after nearly three years of inflation above target.

“It is tempting to rush ahead to that discussion. But it’s still too early to consider cutting our policy rate,” he said.

“Until we see evidence that we are clearly on a path back to 2% inflation, I expect Governing Council will continue to debate whether monetary policy is restrictive enough and how long it needs to remain restrictive to restore price stability. In a world with increased macroeconomic volatility, we are also conscious that we may need to be nimble,” Macklem said.


Macklem’s clearest language yet about reducing the highest borrowing costs since 2001 come just as Fed Chair Jerome Powell this week discussed the prospect of 2024 rate cuts, while central bankers in Europe remained more hawkish. Some investors had already predicted the BOC would cut rates as soon as April and a majority saw a move around the middle of next year.

Macklem said he expects 2024 “to be a year of transition” where past rate hikes create slack in the economy and inflation moderates. Inflation will likely be bumpy and progress back to target could be slow he said, pointing to pockets of elevated price gains such as for rental housing.

“We don’t need to wait until inflation is all the way back to the 2% target to consider easing policy, but it does need to be clearly headed to 2%,” the Governor said.

The Bank in a separate market notice said starting next month rate announcements will move to 9:45am EST from 10am. The Governor and Senior Deputy will hold a press conference at 10:30am after each decision instead of the current practice of ones held at the four decisions a year with a new economic forecast. The Governor's opening statement will be released at 9:45am alongside rate decisions.

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |

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