Bank of Canada governor Tiff Macklem says the central bank is ready to step in if stress in the global banking system affects Canada, but emphasized it won’t back off from its inflation fight as it works to bring inflation down to its two per cent target.
According to prepared remarks Macklem is delivering at the Toronto Region Board of Trade today, the governor addresses the recent stress in the global banking system that was set off by the collapse of Silicon Valley Bank in the United States.
Macklem concedes that financial instability raises the odds of a sharper economic downturn, but says achieving both financial stability and price stability is important and that the two are related.
The governor says the central bank has separate tools to address both mandates and that the Bank of Canada will take into consideration the interacting effects between financial stress and inflation.
If financial stress leads to tighter borrowing conditions that make loans more expensive and harder to get, he says the governing council would take this into consideration when setting the policy rate.
But though inflation has fallen significantly from its peak of 8.1 per cent last summer, Macklem stresses that the Bank of Canada’s job is not done just yet and there is work to do before it can move below three per cent.
This report by The Canadian Press was first published May 4, 2023.