Bank of Canada Governor Tiff Macklem said there is scope to cool the economy based on an “exceptionally high number” of vacant jobs in the labor market.
In an interview broadcasted on CBC Radio on October 9, Macklem said the current inflation fight is the greatest test the central bank has encountered since it began targeting inflation three decades ago.
But he promised Canadians that monetary policy is effective and he forecast inflation to get back to the central bank’s 2% goal by 2024. Canada’s headline inflation rate fell to 7.0% in August, with core inflation running at around 5%.
Macklem said:
“We need to cool the economy, (but) we don’t want to over-cool the economy. When we look at the economy right now, there is an exceptionally high number of vacant jobs … that’s a clear signal that there is scope to slow the economy, without a lot of people put out of work.”
Canadian employers were actively seeking to fill almost 1 million jobs as of July, data published on Friday showed, while the job vacancy rate fell to 5.4% in July, from a peak of 6.0% in April this year.
The Bank of Canada has lifted its benchmark interest rate by 300 basis points since March, one of its sharpest and fastest tightening cycles ever. Money markets and economists are expecting a 50-basis-point hike on Oct. 26.
Buy Crypto NowMacklem said sectors of the economy that are sensitive to interest rate hikes are beginning to cool.
Macklem concluded:
“Let me be clear, what we don’t want is … inflation and wages to become unmoored to our 2% objective, because if that happens, then we are actually going to need to slow the economy a lot more to get the inflation back to 2%. That’s what we have been what we call front-loading our interest rate increases.”
