MNI: Macklem Sees BOC Hike Debate Ahead Of Oct 25 Decision

Bank of Canada Governor Tiff Macklem said Friday he anticipates again discussing options of holding interest rates or raising them ahead of the next decision on Oct. 25 amid evidence of slowing but sticky inflation, adding that a rise in global bond yields can't replace any needed policy action.

“We will be resuming that conversation” outlined in the minutes from the last decision, he told reporters on a call from IMF meetings in Morocco.

“What I expect it will focus on is do we stay with a policy rate at 5% and let past interest-rate increases work through the economy and relieve price pressures, or is the weight of the evidence of all of those economic indicators when you put them together is it telling us that more action is needed to restore price stability,” he said.

“We don’t want to do more than we have to, we don’t want to make this more painful than it has to be, but we don’t inflation to persist and become entrenched,” he said. Macklem also reiterated his view that while there has been some progress on slowing inflation it remains too rapid and too broad based, even as monetary policy is working to rebalance the economy. (See: MNI INTERVIEW: BOC Could Hike Once Or Twice More, Dodge Says)

Higher global bond yields may reflect investors coming to the view of high-for-long central bank rates amid inflation pressures or longer-term views around U.S. budget deficits and potentially higher neutral rates, Macklem said. (See: MNI INTERVIEW2: Ex-BOC Chief Says Neutral Rate Is Rising)

“To the extent that financial conditions are tighter, that is something that we would take into account in our own monetary policy decisions,” he said. “To the extent that higher long-term rates reflect expectations of future monetary policy, they’re not a substitute for doing what needs to be done to get inflation to come back to our target.” He also said public anger around high borrowing costs and inflation are "symptoms" of how painful higher prices are, and while the Bank is committed to restoring price stability "getting there is not easy."