Tiff Macklem: Release of the Monetary Policy Report
Opening statement by Mr Tiff Macklem, Governor of the Bank of Canada, at the press
conference following the monetary policy decision, Ottawa, Ontario, 5 June 2024.
* * *
Good morning. I'm pleased to be here with Senior Deputy Governor Carolyn Rogers to
discuss today's policy announcement.
Governing Council decided monetary policy no longer needs to be as restrictive and
lowered the policy interest rate by 25 basis points to 4.75%.
We've come a long way in the fight against inflation. And our confidence that inflation
will continue to move closer to the 2% target has increased over recent months. The
considerable progress we've made to restore price stability is welcome news for
Canadians.
Monetary Policy Report
Since our in April, underlying inflation has continued to ease
and economic growth has resumed. With the economy in excess supply, there is room
for growth even as inflation continues to recede.
Let me provide a little more detail about these dynamics.
After stalling in the second half of last year, economic growth picked up in the first
quarter of this year. At 1.7%, growth was lower than projected in the April report. But
consumption growth was solid at about 3%, and business investment and housing
activity also increased.
In the labour market, businesses are continuing to hire workers. Employment has been
growing, but at a slower pace than the working-age population. This has allowed the
supply of workers to catch up with job vacancies. Elevated wage pressures look to be
moderating gradually.
Inflation remains above the 2% target and shelter price inflation is high. But total
consumer price index (CPI) inflation has declined consistently over the course of this
year, and indicators of underlying inflation increasingly point to a sustained easing. I'll
highlight four indicators in particular:
CPI inflation has eased from 3.4% in December to 2.7% in April
our preferred measures of core inflation have come down from about 31⁄2% last
December to about 23⁄4% in April
the 3-month rates of core inflation slowed from about 31⁄2% in December to under
2% in March and April
the proportion of CPI components increasing faster than 3% is now close to its
historical average, suggesting price increases are no longer unusually
broadbased
This all means restrictive monetary policy is working to relieve price pressures. And with
further and more sustained evidence underlying inflation is easing, monetary policy no
longer needs to be as restrictive. In other words, it is appropriate to lower our policy
interest rate.
If inflation continues to ease, and our confidence that inflation is headed sustainably to
the 2% target continues to increase, it is reasonable to expect further cuts to our policy
interest rate. But we are taking our interest rate decisions one meeting at a time.
We don't want monetary policy to be more restrictive than it needs to be to get inflation
back to target. But if we lower our policy interest rate too quickly, we could jeopardize
the progress we've made. Further progress in bringing down inflation is likely to be
uneven and risks remain. Inflation could be higher if global tensions escalate, if house
prices in Canada rise faster than expected, or if wage growth remains high relative to
productivity.
In assessing where inflation is headed, we will continue to closely watch the evolution of
core inflation. We remain focused on the balance between demand and supply in the
economy, inflation expectations, wage growth and corporate pricing behaviour.
With that summary, the Senior Deputy Governor and I would be pleased to take your
questions.