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Bank of Canada Prepared to Raise Interest Rates “Forcefully”

2022 05 03 10 34 43

Targeting high inflation is the Bank of Canada’s top priority, and it’s prepared to raise interest rates “forcefully” if that’s what’s needed.

Bank of Canada Governor Tiff Macklem made the comment in a speech before the Senate Committee on Banking, Trade and Commerce on Wednesday.

“The economy needs higher rates and can handle them. With demand starting to run ahead of the economy’s capacity, we need higher rates to bring the economy into balance and cool domestic inflation,” he said.

Macklem noted that inflation is now at a three-decade high of 6.7%, and is expected to remain above the Bank’s target range of 1% to 3% for the remainder of the year.

“We are committed to using our policy interest rate to return inflation to target and will do so forcefully if needed,” he added. “How high rates go will depend on how the economy responds and how the outlook for inflation evolves.”

What is certain, Macklem noted, is that Canadians should “expect interest rates to continue to rise toward more normal settings.”

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