Bank of Canada head won’t ‘rule anything out’ to tame inflation, including more rate hikes

Bank of Canada governor Tiff Macklem said everything is on the table as he meets with world bank leaders in Washington, where the U.S. Federal Reserve is hinting at more hikes.

On a day when the Federal Reserve spooked markets with its tough talk on interest rates, Bank of Canada governor Tiff Macklem says he won’t “rule anything out” when it comes to the central bank’s own interest rate path and taming Canada’s out-of-control inflation.

Macklem spoke to reporters virtually Thursday from Washington, D.C. where he is attending meetings of the International Monetary Fund and World Bank Group, as well as meetings of G7 and G20 central bank governors and finance ministers.

He wouldn’t rule out pushing rates beyond 50 basis points all in one sitting, after moving to lift rates by that amount to one per cent just last week, but said he “is prepared to be as forceful as needed.”

Earlier Thursday, Federal Reserve chairman Jerome Powell said that a 50 basis point interest rate hike is possible in May after one Fed member had suggested a 75 basis point jump can’t be ruled out as inflation is now up to 8.5 per cent.

The S&P 500 index dropped 1.5 per cent by the end of the North American trading day, while the Dow Jones industrial average closed the day down just over 1 per cent on Powell’s comments. Meanwhile, the tech-heavy NASDAQ fell around 2 per cent.

Craig Jerusalim, portfolio manager at CIBC Asset Management, doesn’t see the Bank of Canada going above 50 basis points all at once.

“They already moved ahead of the U.S., so I think the 50 (basis-point) pace is probably more appropriate and measured,” he said.

Andrew Kelvin, strategist at TD Securities, said in an interview that he believes the central bank could lift rates by more than 50 basis points if “there is little to no slack left in the economy.”