Macklem Warns of Inflation Risks Amid Ongoing Trade Tensions

Bank of Canada Governor Tiff Macklem spoke about the challenges of bringing inflation back to its target rate without harming the Canadian economy. He noted that inflation has a corrosive effect on people's confidence in the economic system, making them feel like they're not getting ahead despite working hard.

Macklem emphasized that the current war in Iran driving up energy prices worldwide is a temporary issue, but allowing it to become ongoing inflation would jeopardize people's trust in the system. He stated that the central bank has successfully brought down inflation before and will do so again.

When asked about the risk of moving too slowly in response to inflation, Macklem warned that this could lead to rapid interest rate hikes, which are difficult for individuals and businesses to adjust to. He acknowledged that monetary policy works with a lag, affecting people's purchasing power only after some time has passed.

Macklem also discussed the impact of punitive tariffs on Canada-US trade relations, stating that these measures create uncertainty and harm both countries' businesses. He expressed hope that trade between the two nations will return to its previous state but acknowledged that this may not happen anytime soon.