“With past interest rate increases still working their way through the economy, monetary policy may be sufficiently restrictive to restore price stability,” Governor Tiff Macklem said in a speech to the Calgary Chamber of Commerce a day after officials held the benchmark borrowing rate steady at 5%.
“Just as it took longer to see clearer evidence that higher interest rates were moderating demand in the economy, it may now be taking longer for this to translate into lower inflationary pressures,” he said.Although inflation reaccelerated to 3.3% in July, the governor said officials are encouraged by the progress they’ve made so far and the 2% target is “now in sight.” He expects the moderating economy to help achieve that goal.
Canada’s economy shrank at a 0.2% annualized pace in the second quarter, which means growth has averaged a little less than 1% over the last three quarters, while the economy’s productive capacity grew at a rate of a little over 2%.
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