BoC's Macklem: More interest rate hikes are "warranted"

  10/7/2022 |   SHARE
Posted in Mortgage Interest Rates by Anabela Serra | Back to Main Blog Page

Having already raised interest rates by 300 basis points this year, the Bank of Canada’s Tiff Macklem confirmed on Thursday that additional rate hikes (plural form) are “warranted.”

In a prepared speech delivered at the Halifax Chamber of Commerce, Macklem said the Bank has yet to see clear evidence that underlying—or “core”—inflation is coming down.

“When combined with still-elevated near-term inflation expectations, the clear implication is that further interest rate increases are warranted,” he said. “Simply put, there is more to be done.”

Additionally, he said labour conditions remain “very tight,” wage growth is rising, and the economy remains in excess demand. “We will need additional information before we consider moving to a more finely balanced decision-by-decision approach,” he said.

Observers took the comments as hawkish and a signal that the Bank isn’t likely to pivot to a more dovish stance at its upcoming rate meeting on October 26 as some had expected.

“There had been a narrative offered in the market that October’s hike would be one more and done with a coming dovish pivot,” wrote Scotiabank economist Derek Holt. “That narrative got flushed today.”

“With less than three weeks to go before the next decision on October 26…the Governor is clearly not thinking that the October communications will involve a dovish pivot versus a largely preset path to keep hiking thereafter,” he added.

Source: Canadian Mortgage Trends

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