The Importance of Interest-Rate Policy in Canada

by webmaster

In a recent statement, Bank of Canada Governor Tiff Macklem emphasized the crucial role of interest-rate policy in addressing inflation concerns. Despite the rise in government-bond yields, Macklem stressed that higher yields should not be considered a substitute for effective interest-rate policies.

The increase in bond yields indicates that financial markets anticipate central banks to maintain higher interest rates for an extended period in order to achieve their inflation targets. However, Macklem made it clear that this alone would not be sufficient to curb inflation. The Bank of Canada’s primary objective is to achieve and sustain a 2% inflation rate.

Macklem acknowledged that if higher long-term rates begin to impact other aspects of financial conditions and tighten them, the central bank would consider these factors when making monetary policy decisions. Nevertheless, he reiterated that higher bond yields should not overshadow the importance of implementing the necessary measures to bring inflation back to target levels.

These remarks were made by Macklem during a video conference from Marrakesh, Morocco, where he participated in the fall meetings of the International Monetary Fund and World Bank.

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