Bank of Canada Governor Tiff Macklem used a Twitter video Monday to restate the case that the pain of higher interest rates will pay off as the cost of living comes back to normal.
“Inflation is too high and that’s affecting all Canadians,” Macklem said in the video message. “It is important that we get inflation back down so Canadians can plan their spending and their savings, and they don’t get surprised by big changes in their cost of living.”
“So yes, it can seem a bit counter-intuitive. We are raising interest rates, which is raising the cost of borrowing when other costs are going up,” Macklem said. “But it is by raising interest rates that we are going to slow spending in the economy, give the economy time to catch up, and take the steam out of inflation. That’s going to get inflation back down, that’s going to be better for all Canadians.”
Investors predict the BOC will hike the 3.25% policy rate another half-point at its meeting next month, and former Governor David Dodge said they could go by 100bp over the next two meetings. (See: MNI INTERVIEW: BOC Can Hike 100 In Next 2 Meets- Ex-Gov Dodge)