TORONTO – Below are some key quotes from a news conference by Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers on Wednesday after the central bank surprised by raising key interest rate by 100 basis points to 2.5%.
MACKLEM ON WAGE-PRICE SPIRAL
“So far we are not seeing a wage-price spiral. If you look at wages over the last couple of years, they are broadly in line with productivity.”
MACKLEM ON MESSAGE TO CANADIANS
“Our message to Canadians is that high inflation is not here to stay. We are raising rates quickly and we are doing that to moderate spending and to allow supply time to catch up, to take the steam out of inflation.”
MACKLEM ON CONCERNS OVER RISK OF HIGH INFLATION BECOMING ENTRENCHED
“This decision does reflect concern. It reflects concern that inflation is too high and it’s affecting all Canadians. And it reflects concern that the risk that high inflation could become entrenched has gone up.”
MACKLEM ON ‘FORCEFUL’ RATE HIKE
“We had indicated we were prepared to be more forceful. Today was more forceful. … Yes, it is a very unusual move to increase by 100 basis points at one decision and that really reflects the very unusual, exceptional circumstances that we find ourselves in.”
MACKLEM ON FRONT-LOADING INTEREST RATE RESPONSE
“By front-loading what we’re really trying to do is avoid even higher interest rates further down the road. … By front-loading our interest rate response that will cool demand, allow supply time to catch up and take the steam out of those domestic inflationary pressures.”
MACKLEM ON GETTING RATES TO TOP END OR SLIGHTLY ABOVE NEUTRAL RANGE QUICKLY
“By front-loading our interest rate response we are trying to avoid the need to increase interest rates even further down the road. What this argues for is getting our policy rate up to the top end or slightly above the neutral range quickly.”
ROGERS ON RESTORING BALANCE
“Right now and for the last year, we know that housing activity and housing prices have been unsustainably high. We’ve seen a spike in demand, low interest rates combined with chronically low supply and we’ve had very elevated housing prices. This is part of what’s feeding into excess demand in the Canadian economy. … Our goal is to get that demand down and part of restoring the balance of supply and demand in the Canadian economy is restoring that balance in the Canadian housing market.”
MACKLEM ON SOFT LANDING
“We do think there are good reasons why a soft landing is achievable. For one thing … the economy is in excess demand. Our objective is to take out the excess and not choke off demand. We need to cool the economy. If you look at the labour market. Labour market vacancies, unfilled jobs, are at a record level. There is lots of room to reduce those vacancies without significantly increasing the unemployment rate.”
MACKLEM ON HIGH COMMODITY PRICES
“Unlike many of our trading partners, high commodity prices, while they are certainly affecting consumers in the form of higher prices, they are bringing more income into this country. So we are not being as affected as many other countries by some of these global forces.”
(Reporting by Fergal Smith, Allison Lampert, Anna Mehler Paperny; Compiled by Denny Thomas)
