remarks by tiff macklem governor of the bank of canada calgary chamber of commerce september 7, 2023 calgary, alberta economic progress report : target in sight, but we ’ re not there yet introduction good afternoon. it ’ s a pleasure to be here. i want to thank the calgary chamber of commerce and the bank of canada ’ s calgary office for setting up such an impressive event. i look forward to meeting with and hearing from many of you while i ’ m in alberta. monetary policy is working to bring inflation down — and we are encouraged by the progress we ’ ve made so far. consumer price index ( cpi ) inflation was 3. 3 % in july, roughly in line with what we expected in our july monetary policy report. our 2 % target is now in sight. but we are not there yet and we are concerned progress has slowed. monetary policy still has work to do to restore price stability for canadians, and we are committed to staying the course. in my time with you here, i will begin by discussing our recent monetary policy decisions. then i want to dig into the inflation data to give you a sense of what we ’ re seeing and what we ’ re looking for on the path to price stability. i also want to outline the progress we ’ ve seen in rebalancing demand and supply in the economy. how these evolve will be critical to our policy decisions going forward. finally, i want to answer a question we are getting more frequently from canadians : why are we so focused on the 2 % target? isn ’ t being close to 3 % good enough? the short answer is no — and i ’ ll explain why we ’ re committed to getting all the way back to 2 %. our recent monetary policy decisions at both our june and july monetary policy decisions, we increased our policy rate, bringing it to 5 %. these were difficult decisions. but they reflected the accumulated evidence that excess demand in the economy and underlying inflationary pressures were both proving more persistent. and it was our judgment that more restrictive monetary policy was needed to restore price stability for canadians. i would like to thank don coletti and mikael khan for their help in preparing this speech. not for publication before september 7, 2023 1 : 55 pm eastern time - 2the data since mid - july are providing clearer evidence that higher interest rates are moderating spending and rebalancing demand and supply in the economy. however, we remain concerned that overall inflationary pressures are persist

swings in the cost of living. price stability means households and businesses can plan and invest with confidence that their money will hold its value. i want to make one final point. we review our monetary policy framework, including our target, every five years so that we can be confident that it remains fit for purpose. this is a strength in our framework. looking ahead, canadian businesses, households and governments will need to confront some big global forces, including demographic changes, rising geopolitical tensions, climate change and digitalization. some of these forces could add cost pressures and increase the volatility of prices. 1 some commentators have suggested this means we should target a higher rate of inflation. understanding these forces and what they mean for monetary policy is at the very heart of delivering on our mandate. but it is not obvious that allowing for higher inflation will help us deal with these challenges. to the contrary, more inflation and the uncertainties that come with more volatility in inflation may make the needed adjustments even more difficult. these aren ’ t the first structural changes to confront the canadian economy. the past 30 years have shown us that the 2 % target has been a helpful anchor as businesses, households and governments face shifting economic forces. as with past reviews, we will work hard to analyze how the framework, including the 2 % target, has been working and whether it ’ s the best framework for the future. conclusion it is time for me to conclude. we ’ ve come a long way in the past year. monetary policy is working, and inflation is coming down. but we still have some way to go to restore price stability. with past interest rate increases still working their way through the economy, monetary policy may be sufficiently restrictive to restore price stability. however, governing council is concerned about the persistence of underlying inflation. inflation is still too high, and there is little downward momentum in underlying inflation. we will be carefully assessing the balance between demand and supply and underlying inflation to gauge progress toward price stability. if we need to raise interest rates further to restore price stability, we are prepared to take further action. but we don ’ t want to raise our policy rate more than we have to. we know higher interest rates are hitting some canadians hard, and we don ’ t want this to be any harder than necessary. but letting too - high inflation persist 1 c. lagarde, “ policymaking in an age of shifts and breaks ” ( speech at the economic policy symposium “ structural shifts in