CA BOC Gov Macklem Speaks

post: BoC’s Macklem: Broad-Based, Prolonged Tariffs Could Lead To A Recession post: BoC's Gov. Macklem: We've demonstrated that we can use our instruments to control inflation.

Good morning. It’s a pleasure to be here in Alberta. I want to thank Calgary Economic Development for the invitation. The last time I spoke in Calgary was about 18 months ago—September 2023. The post-pandemic crisis was easing, but uncertainty remained. Inflation was still above 3%, and the Bank of Canada’s policy interest rate was 5%. Canadians were being squeezed by still-elevated inflation and higher interest rates. Could we get inflation back to our 2% target without tipping the economy into recession? As 2024 closed out, this question was largely resolved. Inflation was on target, and economic growth had picked up. The Canadian economy was in good shape. Inflation came down through the first half of last year and had been close to 2% since last summer. As the Bank’s Governing Council became more confident that inflation was on track to return to target, we began reducing our policy interest rate, starting last spring. Substantial rate cuts through the rest of the year boosted household spending, and economic growth picked up to 2.2% in the third quarter and 2.6% in the fourth. Employment growth also strengthened in November through January, and the unemployment rate came down. The Canadian economy managed a soft landing. Unfortunately, we’re not going to stay on the tarmac for long. We now face a new economic crisis. Since President Trump began threatening to impose a wide range of tariffs on post: <CAD=>:*BoC Must Stop Initial Tariff-Fueled Price Hikes From Spreading, Macklem Says post: BoC's Gov. Macklem: BoC needs to set policy that minimizes the risk of errors; that means being less-forward looking than normal.Macklem: Tariffs and trade uncertainty are hurting the Canadian economy The United States has imposed tariffs on some Canadian exports and threatened more tariffs that could come into effect in early April. Canada has retaliated with tariffs on some US imports and has promised more counter measures if the trade war escalates. Broad-based and long-lasting tariffs will hurt Canadian exports and overall output and will push prices higher. Tariffs will also have a big impact on key Canadian industries and many regions of Canada. These include: • the oil and gas industry in Alberta, which could be hit with 10% tariffs on US exports • potash producers in Saskatchewan, who export a lot of fertilizer to the United States • farmers in the Prairies, who use US phosphate on their crops and buy machinery and equipment from the United States post: BoC's Gov. Macklem: Canadian economy managed a soft landing. Unfortunately, we're not going to stay on the tarmac for long.

post: BoC's Gov. Macklem: Tariff shock wouldn't prompt COVID-like response. post: BoC's Gov. Macklem: We're watching core inflation closely.

Good afternoon. It’s a pleasure to be here. I want to thank the Mississauga Board of Trade and the Oakville Chamber of Commerce for inviting me. When I accepted this invitation, months ago, I intended to use this opportunity to launch the renewal process for our monetary policy framework. The framework sets out the goal for monetary policy—to maintain price stability over time. In simple terms, we aim for a 2% inflation target, so inflation remains within a range of 1% to 3% most of the time. We renew the framework, in agreement with the Government of Canada, every five years. This is a strength of our system. It gives us the opportunity to review performance and consider whether the framework remains the best one for the future. That was my speech topic until President Trump announced significant and broad-based tariffs on Canadian exports. While the new tariffs have not taken effect yet, the uncertainty around US trade policy is already affecting our economy. And if the United States starts a protracted trade conflict, the consequences could be severe. I know this is foremost on everyone’s mind. That’s why I’ve adjusted my remarks. President Trump wants to use tariffs as an instrument of US policy. What that means for the global economy and for the Canada-US trade relationship is highly uncertain. We don’t know what tariffs will be imposed, when they’ll start, how long they’ll last—or even really to what end. We also don’t know how Canada and other countries will respond. And even when we know more, it will be hard to predict the economic impacts because we haven’t experienced such broad-based tariffs since the 1930s. What looks inescapable, however, is that a structural change is upon us. Increased trade friction with the United States is a new reality. While there are still more questions than answers, I will use my remarks to speak to some of the key questions: What could this structural change look like? How would a protracted trade conflict affect the Canadian economy in both the short run and the long run? post: BoC's Gov. Macklem: 2026 monetary policy framework renewal should leave the 2% inflation target unchanged. post: BoC's Gov. Macklem: The BoC wants to consider the interaction of monetary policy and housing, does persistently high shelter price inflation distort measures of core inflation? post: BoC's Gov. Macklem: The BoC's focus will be on how we can improve the framework and its implementation to best address structural changes. post: BoC's Gov. Macklem: The updated BoC model shows Canadian output would fall almost 3% over two years if US imposed tariffs, all but wiping out growth forecast for 2025 and 2026.

Good afternoon. It’s a great pleasure to be back in Vancouver for my final speech of 2024. I want to thank the Greater Vancouver Board of Trade for inviting me. I’m particularly looking forward to our discussion after my remarks. Hearing from you is always the best part. As some of you will recall, I was here in Vancouver two years ago in December 2022. Inflation was close to 7%. We’d just raised the policy rate by 50 basis points to 4¼%, our seventh straight rate hike in our fight against inflation, and we signalled we would be considering increasing rates further. Indeed, we ended up raising our policy rate three more times to 5%. Today, inflation is back at our 2% target. Last week we cut our policy rate by 50 basis points to 3¼%, the fifth consecutive decrease since June. We’ve come a long way in the past two years. Monetary policy has worked to restore low inflation. Interest rates have come down substantially, and household spending has begun to pick up. But I am not here to give a victory speech. Price stability is low, stable inflation. Inflation is low once again; now we need to stabilize it around the 2% target. That’s price stability. That’s giving Canadians the confidence that their cost of living will not change materially year to year. Today I want to talk about delivering price stability for Canadians. I’ll start with the present—where the economy is today—and what we are focused on to keep inflation close to the 2% target. Then I will look back to learn from the past. We need to use the pandemic experience to prepare for future crises. post: BOC'S GOV. MACKLEM: THERE ARE RISKS AROUND OUR INFLATION OUTLOOK; WE ARE EQUALLY CONCERNED WITH INFLATION COMING IN HIGHER OR LOWER THAN EXPECTED.