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Canada’s central bank should consider tackling soaring inflation with another half-point hike in interest rates, its governor told a parliamentary committee on Monday.
Bank of Canada Governor Tiff Macklem said policymakers would consider such a move again, having already raised the main interest rate by half a percentage point to 1% earlier this month. , the largest increase since May 2000.
“The economy needs higher interest rates and can manage them,” Macklem said in his opening address to the House of Commons Finance Committee. “We need higher rates to balance the economy and curb domestic inflation.”
“Awaiting our next decisions. . . I think we will consider taking another 50 basis point milestone,” he added.
Inflation hit a three-decade high of 6.7% in March and is expected to continue rising as the war in Ukraine has pushed up commodity prices and further disrupted the global supply chain.
Macklem said inflation is too high and Canada’s central bank is committed to using its “tools”, if need be “forcefully”, to bring inflation under control.
Macklem last week said he would not “rule out” a rate hike of more than half a percentage point, but conceded on Monday that such a move would be “highly unusual”. The bank has generally raised rates in small quarter-percentage-point increments, and Macklem said last month’s move was itself an “unusual” step for the central bank.
Central banks around the world are tightening monetary policy to combat soaring inflation. The US Federal Reserve is expected to raise its key rate by half a percentage point at its next meeting in May. However, Christine Lagarde suggested that the European Central Bank would be less aggressive than the Fed given the risks to the bloc’s growth and the fact that price pressures in Europe stem largely from supply-side constraints.