MNI BRIEF: BOC's Macklem Says Close To Rebalancing Inflation

Bank of Canada Governor Tiff Macklem said Wednesday he's getting close to rebalancing the economy with monetary policy restraining a stronger-than-expected expansion, and it "made sense" to pause rate hikes earlier this year before returning this week with a second straight tightening.

The full effect of the Bank's nine prior rate hikes has yet to be fully felt, he said after raising the benchmark rate another quarter point to 5%. (See: MNI BOC WATCH: 25BP Hike To 5%, Warning On Inflation Sticking)

“With the increase in our policy rate in June and July, our own forecast has inflation hovering around 3% for the next year, and then coming down gradually to the 2% target in the middle of 2025. It means that we think we’re close, but what I would highlight is that there a number of things that have to happen for that forecast to be realized… for inflation to ease back to target." While it would be "unnecessarily painful" to overdo rate hikes, Macklem said, “it’s clearly too early to be talking about interest-rate cuts.” The Governor also said that with resilient growth there remains a path to restoring price stability without a recession, a so-called soft landing.