Front-loading clamp cycles tend to be followed by softer landings

Following the Bank of Canada’s (BOC) decision to raise the policy rate by 100 basis points to 2.5% in July, Governor Tiff Macklem delivers remarks on the policy outlook and answers questions from the press .

Key points to remember

“Rising interest rates in advance now avoids having to resort to even higher interest rates in the future.”

“Front-loading crunch cycles tend to be followed by softer landings.”

“A rate increase of 100 basis points is highly unusual and reflects unusual economic circumstances of inflation nearing 8%.”

“Pressure from higher short-term interest rates will get us through this tough time and back to normal.”

“The goal is to bring inflation down to 2% with a soft landing for the economy; rapid rate hikes prevent inflation from taking hold.”

“More than half of the components of the consumer price index exceed 5%.”

“We expect a soft landing, but the path to that has narrowed due to persistently high inflation.”

“The credibility of the bank’s inflation target is tested but remains credible overall.”

Market reaction

USD/CAD continues to push lower on these comments and was last seen losing 0.6% on the day at 1.2944.

Comments are closed.