Bank of Canada Governor Tiff Macklem said that interest rates may have peaked as inflation continues to decline and economic growth is weakening across the country.
To lower inflation, the Bank of Canada raised interest rates 10 times between March 2022 and July of this year, pushing its benchmark overnight rate up to a 22-year high of 5%.
The higher rates have worked, with Canada’s inflation rate falling to 3.1% this October from more than 8% last year, though inflation remains above the central bank’s annualized 2% target.
“This tightening of monetary policy is working, and interest rates may now be restrictive enough to get us back to price stability,” Macklem said during a speech he delivered in New Brunswick.
Futures traders now expect that the Bank of Canada’s next move will be to lower interest rates by mid-2024.
In his speech, Macklem acknowledged both the importance of higher interest rates to tame inflation and the impact they have had on Canadian individuals and businesses.
“To return to low inflation and stable growth in the years ahead, we need these higher interest rates and slow growth in the short term,” he said.
The Bank of Canada’s next interest rate decision is scheduled to occur on Dec. 6.