TORONTO: Bank of Canada Governor Tiff Macklem has opened the way to increasing the pace of interest rate cuts, the Financial Times reported on Sunday. Macklem told the newspaper in an interview that rate-setters are concerned about the potential impact of lower oil prices on Canada's labour market and economy. “As you get closer to the target, your risk management calculus changes,” Macklem told the newspaper. “You become more concerned about downside risks. And the labour market is pointing to some downside risks.”
After holding its key policy rate at 5 per cent for a year, the highest in more than two decades, the BoC has cut it by a quarter-point on three consecutive occasions since June, dropping it by 75 basis points to 4.25 per cent earlier this month. Overall inflation in Canada fell to a 40-month low of 2.5 per cent in July. Macklem said last week that the bank saw growth strengthening but there were some downside risks to the expected acceleration. “Trade disruptions could mean a larger deviation from the 2 per cent inflation target,” he said in a speech to the Canada-UK Chamber of Commerce in London.
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