BoC Governor Tiff Macklem, during a parliamentary committee hearing, spoke on the progress made in curbing inflation. He stated, “Inflation is coming down quickly—data this morning show it fell to 4.3% in March. And we forecast it to be around 3% this summer.”
He emphasized the need for inflation expectations, services price inflation, wage growth, and corporate pricing behavior to normalize before inflation can reach the 2% target. He warned, “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.”
Macklem, expects inflation to return to 2% by the end of 2024 and noted that Canadian GDP growth would be weak for the rest of this year, gradually picking up in 2024 and through 2025.
He identified the biggest upside risk as the stickiness of services price inflation and the key downside risk as a global recession. While acknowledging that the risks around the inflation forecast are roughly balanced, he noted, “with inflation still well above our target, we continue to be more concerned about the upside risks.”
