The Governor of the Bank of Canada announced the start of lowering interest rates in the coming period, especially after the Canadian inflation rate reached close to the 2.9 level, and gasoline prices rose.
Canada's inflation rate may remain close to 2.9%
During a speech before the House of Commons Finance Committee, Governor Tiff Macklem of the Bank of Canada confirmed that the inflation rate in Canada may remain close to the level of 2.9% over the next few months. This is especially true in light of the rise in the price of gasoline, as reported by the Reuters news agency.
Reducing interest rates
Additionally, an official from the Bank of Canada explained that it is anticipated that the bank will start lowering interest rates before inflation reaches 2%. However, he also explained that if the Bank of Canada lowers interest rates and this begins to weaken the performance of the Canadian dollar, the Bank of Canada may take this into consideration when deciding whether or not to lower interest rates.
Continuation of the recent decline in core inflation
It is highly improbable that interest rates will return to the levels that existed prior to the implementation of COVID-19. Furthermore, the Governor of the Bank of Canada stated that even if the Bank of Canada does begin to reduce interest rates, it is likely that this will be done in a manner that is somewhat gradual. As an additional point of interest, Tiff Macklem reaffirmed that the Bank of Canada is seeking reassurance that the recent decline in core inflation will continue.
Statements of the Governor of the Bank of Canada
It is also noteworthy that the Governor of the Bank of Canada has recently made some significant statements concerning the direction of monetary policy and the independence of the central bank from its American counterpart. This is significant because the two institutions are experiencing slightly different economic conditions. The following are some of the points that Macklem explained in this regard:
- The business regulations established by the Federal Reserve of the United States are not obligatory for Nick Canada.
- There is a strong possibility that the Bank of Canada will be able to reduce interest rates.
- It is anticipated that the growth of the GDP will reach 1.5% in 2024, and then 2.0% in both 2025 and 2026.
- Recent economic data that has been made public since January has provided the Bank of Canada with additional evidence to support its belief that inflation will continue to fall.
- As of right now, the Bank of Canada anticipates that core inflation will continue to gradually decrease.
- Canada's economy appears to be expanding at a faster rate than before.
- It would appear that monetary policy is beginning to make its way onto the economic scene.
- In contrast to the Federal Reserve in the United States, the Bank of Canada is not required to take any action.
There is a good futures market
For her part, First Deputy Governor Carolyn Rogers confirmed during a press interview that it is not necessarily with the intention of saying that you should stop doing this because there is some value in having a good futures market. You create liquidity in normal times.
At the same time, Caroline added that the measure that we hope will come out of our side and that we are presenting and talking about is for these institutions to conduct stress tests and ensure that their margins are large enough to take into account the large fluctuations in prices.
It is worth noting that reports on financial stability issued by the Central and Private Banks indicate that the financial leverage obtained by asset managers through borrowing in the repo market has increased by about 30 percent in the past 12 months.
