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BOC’s Macklem: People will believe inflation is coming down when they see it’s coming down


  • Macklem spoke with the Financial Post
Adam Button

Adam Button

Thursday, 14/07/2022 | 16:26 GMT-0

14/07/2022 | 16:26 GMT-0

  • We wanted to send a clear message to Canadian businesses and Canadian
    households that they should expect inflation to come down and they
    should build that into their expectations.
  • The fact that we haven’t seen as much appreciation of the Canadian dollar means we’ve got to do more through interest rates
  • Canadians understand that the economy is overheated and it needs to cool
  • We’re all seeing shortages of workers
  • We’re all seeing shortages of goods and services
  • Inflation is probably going to go up a little further before it starts
    coming down, and even when it starts coming down, in the beginning, it’s
    going to come down pretty slowly.
  • Monetary policy works in the lag. The sooner you get started, the sooner it’s going to work
  • Hikes “puts us in the middle of what we call the long-run neutral range” between 2-3%
  • We also indicated that we do expect that interest rates will need to
    rise further to cool demand and let supply catch up and see some easing
    in inflationary pressures
  • We stressed repeatedly that by front-loading the interest-rate
    increases, what we’re doing is we’re trying to avoid the need for
    interest rates to be even higher further down the road.
  • Where interest rates ultimately need to go, is going to depend on the
    evolution of the economy and importantly, on the evolution of inflation
  • we are not getting the historical investment boom in oil and gas that we’ve had when oil prices go up sharply like they have
  • The USD has strengthened a lot our exchange rate is appreciating against most other countries
  • Our objective is to get inflation back to target with a soft landing
  • A year ago, oil was about 50 bucks. As we normally do, we assumed that it would stay roughly at 50 bucks
  • if we had known everything a year ago that we know today, yes, we
    probably would have started raising interest rates a little bit earlier
  • Full interview

Macklem will have a hard time living down this line from almost exactly two years ago:

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