Bank of Canada Governor Tiff Macklem has said that the central bank is considering another
50-basis-point increase to its benchmark interest rate to bring inflation down from a 31-year
high.
Speaking in Ottawa, Macklem said the decision to hike by half a percentage point earlier in April
was an “unusual step” that officials could continue using at future meetings.
“We’ve signaled very clearly Canadians should expect further increases,” Macklem said at a
parliamentary committee hearing. “Looking ahead to our next decisions, I expect we will be
considering taking another 50-basis-point step.”
It’s the first time that the Bank of Canada Governor has acknowledged that another half-point
increase is a serious option at the next central bank policy meeting on June 1.
The Bank of Canada uses interest rates to keep inflation within a target range of 1% to 3%.
However, the latest data showed that Canada’s inflation rate was at 6.7% in March, its highest
level in 31 years.
Swaps trading suggests that an increase in the policy rate from 1% to 1.5% on June 1 is fully
priced in. Markets are giving smaller odds of 75 basis point increase at the next policy meeting.
In his remarks, Governor Macklem downplayed the likelihood that policy makers will move by
more than 50 basis points.
“I’m not going to rule out other options but anything bigger than 50 basis points would be very
unusual,” Macklem said.
