MNI BRIEF: BOC Says Weak CAD May Mean More Rate-Hike Work

Bank of Canada Governor Tiff Macklem said Thursday the U.S. dollar's strength against his currency may need more effort with rate hikes to bring inflation back to target.

“Normally when we raise interest rates, the exchange rate actually appreciates, and so that does part of the work for us. This time that’s not happening, so other things equal, as economists like to say, that means more to do with interest rates,” he said after a speech in Halifax, Nova Scotia. CAD weakened 0.9% at midday Thursday to CAD1.3739 and from about CAD1.25 in early June as investors bet the Fed would catch up with BOC rate hikes and sought refuge from global risk. The Bank can hike 100bp in the next two meetings, former Governor David Dodge has told MNI.

Macklem also said “there is a path to a soft landing, but it is a narrow path," and “with inflation running at 7%, we are more concerned about the upside shocks to inflation.”