Governor Tiff Macklem says inflationary pressures aren’t easing as quickly as the central bank wants, and more rate hikes could be coming if the economic data supports it.
“We need a period of growth below trend, below potential, to let supply catch up with demand. That's what's going to relieve those price pressures,” Macklem said. Two per cent inflation is still far awayMacklem said he expects the consumer price index, which measures inflation to grow at around three per cent for the next year before gradually declining to target.
“Rapid population growth is contributing to both supply and demand in the economy,” Macklem said. “Newcomers to Canada are entering the labour force, easing labour shortages, but at the same time they add to consumer spending and the demand for housing.” While Macklem acknowledged that higher interest rates are likely hurting many Canadian households, he said spending is still strong, especially on services, and that’s contributing to stubborn inflation.