BoC Governor Tiff Macklem delivered three main messages to a House of Commons Committee. First, the Canadian economy is strong… Second, inflation is too high…. Third, we need higher interest rates.”
“The economy needs higher rates and can handle them….,” he said, “We also need higher interest rates to keep Canadians’ expectations of inflation anchored on the target. We can’t control or even influence the prices of most internationally traded goods. But if Canadians’ expectations of inflation stay anchored on the 2% target, inflation in Canada will come back down when global inflationary pressures from higher oil prices and clogged supply chains abate.”
“Canadians should expect interest rates to continue to rise toward more normal settings. By more normal we mean within the range we consider for a neutral rate of interest that neither stimulates nor weighs on the economy. We estimate this rate to be between 2% and 3%,” he added.
