Macklem, answering questions in the Senate’s banking, trade and economy committee, said that while the central bank is starting to see signs rate increases are slowing the economy, it is still in excess demand.Sign up to receive daily headline news from Ottawa Citizen, a division of Postmedia Network Inc.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc.
The Bank of Canada surprised markets with a smaller-than-expected 50-basis point increase last week, lifting the policy rate to 3.75%. It also forecast the economy would stall over the next three quarters. Inflation, meanwhile, has eased to 6.9% from a peak of 8.1%, but it is still far above the central bank’s 2% target and underlying price pressures remain broad-based.Article content“It’s been a long time since we had high inflation and we’re rediscovering that it corrodes the social fabric,” he added. “It makes people angry. People feel ripped off. And that’s one of the big problems with inflation and it’s an important reason why we got to get it back down.
“The effects of higher rates will take time to spread through the economy. … There are no easy outs to restoring price stability.”