MNI BRIEF: BOC Says Far From Limit On Rate Divergence With Fed

Bank of Canada Governor Tiff Macklem told reporters Wednesday there remains a lot of potential for interest rates to go below the Federal Reserve, at a time when some investors have speculated that could trigger weakness in the currency.

“There are limits to how far we can diverge from the United States and we aren’t close to those limits,” Macklem said. Canadian economic conditions are also different from the U.S. and markets have been able to see that as well, Macklem said. Senior Deputy Carolyn Rogers also said “a big part of inflation was global, you’re going to see some divergence on the way down.”

Macklem also said that while borrowing costs can fall further “they are probably not going to come down as low as they were pre-Covid.” (See: MNI BOC WATCH: Cut Leads G7 And Macklem Sees More Slow Moves)