Bank of Canada Governor Tiff Macklem expressed optimism on Friday, stating that once the central bank is assured of a clear path back to price stability, they will consider lowering the policy interest rate.
During his final speech of the year at the Canadian Club Toronto, Macklem emphasized that it is still too soon to think about interest rate cuts. He also stressed that they won’t need to wait for inflation to reach the 2% target to consider easing policy, but it needs to be clearly heading in that direction.
Key takeaways from the speech:
Macklem expects 2024 to be a year of transition, with the effects of past interest rate increases still impacting the economy. This period of weakness will ultimately pave the way for a more balanced economy.
He also anticipates growth and jobs to pick up next year and inflation to approach the 2% target, which will prompt the governing council to consider lowering the policy interest rate.
Macklem is cautious, stating that it’s still too early to consider cutting the policy rate until there is clear evidence of inflation returning to the 2% target. He emphasized the need for more downward momentum in core inflation and careful monitoring of various economic factors.
Market Reaction:
The Canadian Dollar remained steady, with USD/CAD hovering around 1.3370, on its way to the lowest weekly close since July.
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