Bank of Canada Governor Tiff Macklem says it’s too early for the central bank to consider cutting interest rates.
In a speech delivered in Toronto, Macklem said that the Bank of Canada won’t seriously discuss cutting interest rates until inflation is back down to its 2% annualized target.
Inflation in Canada is currently at an annualized rate of 3.12%.
“I know it is tempting to rush ahead to that discussion. But it’s still too early to consider cutting our policy rate,” said Macklem.
However, Macklem did acknowledge that Bank of Canada officials feel that interest rates are now high enough to bring inflation back down to 2% and there is likely no need to further raise rates.
“The members did agree that the likelihood that monetary policy was sufficiently restrictive to achieve the inflation target had increased,” he said.
Futures traders are betting that the Bank of Canada will begin cutting interest rates by April 2024 and that rates will come down a total of 100 basis points by October of next year.
Last week, the Bank of Canada announced that it is holding its benchmark overnight interest rate at its current level of 5%. The central bank’s next interest rate decision is scheduled for Jan. 24, 2024.
