OTTAWA — Bank of Canada Governor Tiff Macklem said on Wednesday there was uncertainty about how quickly inflation would come back down due to the unique nature of the COVID-19 pandemic, which has helped drive up prices.
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Macklem, speaking to the Senate banking committee, reiterated that interest rates would have to start going up this year to tackle inflation, which is currently 4.8 per cent, more than double the central bank’s 2 per cent target.
“There is some uncertainty about how quickly inflation will come down because we’ve never experienced a pandemic like this before,” he said.
With labour markets tightening and evidence of capacity pressures increasing, rate rises were essential, he said.
The bank said last week the economy no longer needed help to deal with the effects of the COVID-19 pandemic, but kept rates steady at a record low 0.25 per cent.
“We are confident that inflation will come down,” said Macklem. Inflation will peak at about 5 per cent in the first half of this year before starting to decrease, he added.
© Thomson Reuters 2022
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