Bank of Canada Gov. Macklem Says Growth Needs to Accelerate
By Paul Vieira
OTTAWA--Bank of Canada officials want growth to accelerate and absorb spare economic capacity, which is a requisite to keep inflation at or near its current 2% level, Gov. Tiff Macklem said Tuesday.
Recent indicators suggest growth won't be as strong as the central bank forecast, Macklem said, according to prepared remarks he was set to deliver in Toronto. He said the pace and timing of further rate cuts--which he reiterated are expected given slowing inflation--would depend on incoming data.
"We want to keep inflation close to the center of the 1%-3% inflation-control band," Macklem said at an event organized by the Institute of International Finance and the Canadian Bankers Association. "Economic growth picked up in the first half of this year, and we want to see it strengthen further so that inflation stays close to the 2% target."
Economists say the likelihood has increased of a possible half-point cut from the Bank of Canada in late October, following a jumbo-sized reduction from the Federal Reserve last week and inflation in Canada returning to the central bank's 2% target, per August data. The Bank of Canada has cut its main interest rate for three straight decisions, all by a quarter point, to 4.25%.
Minutes summarizing deliberations among senior Bank of Canada officials ahead of their Sept. 4 cut indicated policymakers were divided on the outlook for inflation. Some were more concerned that the consumer-price index might slow too quickly amid a downturn in economic activity. Another group of officials viewed inflation risks as balanced, with elevated shelter and services prices offsetting the drag from increased spare capacity.
Officials also discussed scenarios that could trigger discussions about bigger-than-normal rate cuts.
The Canadian economy grew by about 2% in the first half of 2024. The Bank of Canada forecast 2.8% annualized growth in the third quarter, but economists say indicators suggest much slower expansion of just over 1%. The central-bank minutes indicated policymakers agreed that growth of 2% or more was needed given the amount of slack in the economy.
Statistics Canada issues gross domestic product data for July on Friday, and expectations are that the economy edged upward by 0.1% from June.
Macklem said policymakers would be watching data measuring consumer spending, hiring and business investment to gauge overall activity. Retail sales in July surprised on the upside, climbing 0.9% from the prior month, and Statistics Canada estimates retail consumption grew an additional 0.5% in August.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
September 24, 2024 13:10 ET (17:10 GMT)
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