More interest rate hikes are needed to tame inflation, Bank of Canada governor says

Bank of Canada Governor Tiff Macklem was adamant Thursday that he will get inflation back under control, but warned interest rates will have to rise further to do it.

Signs that global inflation pressures are easing are not enough to curb future interest rate hikes as the national economy is still running too hot, the Bank of Canada’s top policymaker says.

Tiff Macklem said in a speech Thursday to the Halifax Chamber of Commerce that even as inflationary pressures beyond Canada’s border such as high global shipping rates and supply chain concerns subside, domestic sources of price growth such as demand for services remain too hot.

The annual rate of inflation clocked in at 7.0 per cent in August as gasoline costs continued to fall, per Statistics Canada, though prices on food continued to surge, hitting a 41-year high.

Macklem also said surging demand for travel and recreation after the end of COVID-19 restrictions fuelled inflation.

Those forces have helped keep the Bank of Canada’s core metrics of inflation hot even as the headline figure from Statistics Canada has slowed in two consecutive months.

“When combined with still-elevated near-term inflation expectations, the clear implication is that further interest rate increases are warranted. Simply put, there is more to be done,” Macklem said Thursday.

The Bank of Canada, as an institution, and Macklem specifically have been targets in recent months for federal Conservative leader Pierre Poilievre, who charges the central bank with enabling the Liberal government agenda and contributing to rampant inflation.

During his leadership campaign, Poilievre said he would fire Macklem from his post if he became prime minister, a proposal that has received backlash in turn as not respecting the independence of the institution.