In a speech in Mississauga, Ontario, Bank of Canada Governor Tiff Macklem emphasized the importance of maintaining the 2% inflation target in the upcoming 2026 review, citing the need to address risks like potential U.S. tariffs. Macklem stated, "Now is not the time to question the anchor that has proven so effective in achieving price stability."
The current monetary policy framework dictates keeping inflation within a 1% to 3% target range, with the upcoming 2026 review aimed at establishing the bank's priorities.
Concerning potential U.S. tariffs, Macklem warned that such actions could lead to severe economic repercussions, possibly resulting in a permanent reduction in output and a structural change. He underlined the need for a comprehensive monetary policy approach, improved inflation measurement, and consideration of monetary policy's interaction with the housing market.
Macklem cautioned that U.S. tariffs and potential Canadian retaliation could significantly hinder domestic growth in 2025 and 2026, resulting in a one-time inflation spike. He stressed the importance of ensuring that any inflationary increase is temporary, stating, "Monetary policy needs to ensure the increase in inflation is temporary."