BoC Governor Tiff Macklem has reiterated the central bank’s commitment to restore price stability, stating that it is prepared to raise rates further if inflation remains materially above the 2% target.
Macklem explained in a speech, “We expect [inflation] will hit 3% this summer, even as the economy continues to grow modestly.” Although encouraged by the progress, he noted that bringing inflation back down to the 2% target would be “more difficult”, with current projections pointing to the end of 2024.
The BoC Governor emphasized, “our job is not done until we restore price stability—in other words, until inflation is centered on our 2% target.”
He also acknowledged the biggest upside risk to their inflation forecast is the persistence of services price inflation, which requires the labor market to rebalance, corporate pricing behavior to normalize, and near-term inflation expectations to come down further in order to return to the 2% target.
