Bank of Canada Getting Ready for a Future Filled with Uncertainty and Shocks

Bank of Canada governor Tiff Macklem acknowledges that the central bank is gearing up for a future filled with increased uncertainty and susceptibility to shocks.

During a speech to the Greater Vancouver Board of Trade, he highlighted ongoing structural changes in the world such as demographic shifts, technological advancements, decarbonization, and a shift away from globalization.

In a prepared speech, Macklem emphasized the need to learn from the pandemic experience to better prepare for future crises.

The Bank of Canada is currently reviewing the policy measures it implemented to restore financial stability and support the economy during the pandemic. This review will include an assessment by an independent panel of experts.

Macklem also mentioned that the sudden spike in inflation in 2022 serves as a reminder that central banks cannot take public trust for granted, despite decades of low and stable inflation prior to the pandemic.

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He mentioned that people couldn’t afford essential items due to a sudden increase in prices post-pandemic. Despite low inflation rates resuming, many prices remain significantly higher, leading to a sense of being overcharged and, in turn, diminishing public trust in the economy.

Throughout the year, the Bank of Canada has lowered its key policy interest rate five times, most recently slashing it by half a percentage point to 3.25 percent.

Macklem stated that the bank will carefully assess the necessity for further rate reductions on a case-by-case basis and expects a more gradual approach to monetary policy in line with the anticipated evolution of the economy.

Statistics Canada’s report revealed a two percent annual inflation rate in Ontario, meeting the target set by the Bank of Canada.

Macklem’s speech preceded the release of the November inflation report the following day.