In a recent speech before the Standing Senate Committee on Banking, Commerce and the Economy, Bank of Canada Governor Tiff Macklem discussed the bank's monetary policy and recent policy announcement. The central bank maintained the policy rate at 4.5% as it continues to assess whether monetary policy is restrictive enough to return inflation to the 2% target.
Macklem noted a steady improvement in inflation and modest economic growth, with inflation falling to 4.3% in March and a forecast of around 3% by summer. However, he emphasized the importance of staying the course and restoring price stability for Canadians. "If monetary policy is not restrictive enough to get us all the way back to the 2% target, we are prepared to raise the policy rate further to get there," he said.
According to Macklem, the Canadian economy remains in excess demand, with stronger-than-expected GDP growth in the first quarter and a tight labor market. He expects weak GDP growth for the rest of the year, with a gradual pick-up in 2024 and 2025. The Bank of Canada anticipates that inflation will not return to the 2% target until the end of 2024.
Despite the progress made, Macklem acknowledged that many Canadians are still struggling with the rising cost of living. He assured Canadians that the bank's job is not done until price stability is restored, as it is crucial for enabling planning, investment, and ensuring money holds its value.