MNI BRIEF: BOC-Expect Rate To Move To Neutral, Can Be Forceful

Bank of Canada Governor Tiff Macklem told reporters Wednesday he can act "forcefully" if needed to curb inflation and that a rise in rates towards a neutral range can be expected.

"Canadians should expect interest rates to continue to rise toward more normal settings," Macklem said.

"By more normal we mean within the range we consider for a neutral rate of interest that neither stimulates nor weighs on the economy," he said, "and our estimate is between 2% and 3%." He also said today's rate hike to 1% is "still well below neutral" and the 1.75% pre-pandemic rate.

"If demand responds quickly to higher rates and inflationary pressures moderate, it may be appropriate to pause our tightening once we get closer to the neutral rate and take stock," he said. "On the other hand, we may need to take rates modestly above neutral for a period to bring demand and supply back into balance and inflation back to target."