MNI BRIEF: BOC Sees Rising Path of Rates to Curb Inflation

Bank of Canada Governor Tiff Macklem said on Wednesday that interest rates will rise to slow inflation from around 5% now back toward the 2% target next year, without signaling if the first move will come at the next decision in March.

"Canadians should expect a rising path for interest rates," he said in an opening statement in testimony to the Senate's banking committee, similar to his view last week when he held a record low 0.25% policy benchmark. "[The] Governing Council agreed it is paramount to ensure that higher near-term inflation expectations don’t migrate into higher long-term expectations and become embedded in ongoing inflation," he said.

"A wide range of measures now suggest economic slack is absorbed," though growth will take a hit this quarter because of omicron, Macklem said. He also reiterated the Bank will continue the reinvestment phase of QE at least until interest rate liftoff occurs, and after that policymakers will consider allowing assets to roll off the balance sheet.