OTTAWA –
Given the continued progress the Bank of Canada has made in bringing inflation back down to the 2 per cent target, it is reasonable to expect more rate cuts, Governor Tiff Macklem said on Tuesday.
Macklem was making his first remarks since data showed the consumer price index in August fell to 2 per cent, the lowest rate since February 2021. The bank aims to keep inflation around the mid-point of a 1 per cent to 3 per cent target range.
The comments represent a change in tone from Macklem, who had previously said more rate cuts were likely if the bank continued to make progress in the fight against inflation.
On Tuesday, Macklem made clear that the bank had already achieved at least some of its main goals.
“With the continued progress we’ve seen on inflation, it is reasonable to expect further cuts in our policy rate,” he said in remarks to a Toronto conference.
“The timing and pace will be determined by incoming data and our assessment of what those data mean for future inflation.”
Consistently cooling consumer prices since the beginning of the year prompted the BoC to start cutting rates, starting in June. Since then it has trimmed its benchmark borrowing cost by a cumulative 75 basis points to 4.25 per cent.
The bank’s next monetary policy decision announcement is on Oct. 23 and money markets see a more than 58% chance of a jumbo 50 basis points rate cut. Another 25 basis point cut is priced in for its last meeting of the year in December.
“We’ve been pleased to see inflation come all the way back to the 2 per cent target. It has been a long journey,” said Macklem.
“Now we want to keep inflation close to the center of the 1 per cent to 3 per cent inflation-control band. We need to stick the landing.”
Macklem reiterated the bank wanted to see growth pick up to absorb economic slack.
In August, closely watched core price measures also cooled to their lowest levels in 40 months.
“We will also be looking for continued easing in core inflation, which is still a little above 2 per cent,” Macklem said.
Macklem repeated concerns that recent indicators suggested that growth was slackening and said the bank would be closely watching consumer spending and business hiring and investment as a gauge for growth. Economists say third quarter growth is likely to be half of the 2.8 per cent projected by the BoC.