MNI BRIEF: BOC Says Neutral Rate May Climb, Cut Talk Premature
Bank of Canada Governor Tiff Macklem said after a speech Thursday that the neutral rate may rise to reflect shifts in the global economy and reiterated it's premature to talk about interest rate cuts that may come into focus when it's clear price stability is being restored.
Referencing things like climate change, demographics and a run-up in global debt he mentioned in his speech, Macklem said “those things could all be pushing the neutral rate up a bit” from the Bank's historical estimate of 2% to 3%. (See: MNI INTERVIEW: Era of Shortages To Force Rates Up - Bill White)
“As there’s clearer evidence that we’re really getting back to price stability, yes interest rates should come down," he said. "We’re not there yet, it’s too early to be thinking about interest rate cuts, because we’re not there yet, but we will get there.” Macklem also said companies shouldn't expect borrowing costs to return to the lows seen in the decade following the 2008 global financial crisis.