‘We’re seeing what we need to see. We just need to see it for longer’: Tiff Macklem explains the BoC’s thinking as it moves toward a pivot

Bank of Canada Governor Tiff Macklem spent much of the past year shooting down speculation about when interest rates will start coming down. On Wednesday, he let his guard slip.

At a news conference following the latest stand-pat rate decision, Mr. Macklem was asked whether a June rate cut was within the realm of possibilities. After a long pause, he responded: “Yes, it’s within the realm of possibilities.”

To the uninitiated, that might seem like a small admission. But in the carefully choreographed language of central bankers – who can move multi-billion dollar markets with the change of an adjective – it was a major signal.

Whether interest rates start coming down in June, July or later depends on the next few inflation reports. And this week’s higher-than-expected inflation data from the United States puts the Bank of Canada in a tricky spot.

But the bank’s governing council has clearly begun debating when to start easing monetary policy. And for the first time since the early months of the pandemic, rate cuts are on the table.

The Globe and Mail sat down with Mr. Macklem several hours after the news conference to ask about rate cuts, a possible divergence between the Bank of Canada and the U.S. Federal Reserve, government spending and why central bank officials are sounding the alarm about Canadian productivity.

The interview has been edited for length and clarity.

I have to start with your comment about a June rate cut being “within the realm of possibilities.” Is that a more or less likely possibility right now?

Tiff Macklem: Those weren’t my words, those were [Canadian Press reporter Nojoud Al Mallees’ words]. I was asked the question. Look, the answer is yes. It’s not the only possibility. And we’re going to take our decisions one at a time.

I’m not going to put it on a calendar. But we’ve been pretty clear, we’re encouraged by the progress we’ve seen. Since January – you look at all our inflation indicators – some are making more progress than others, but they’re all moving in the right direction. And what we’re looking for is for that to be sustained. We want to be confident that that’s durable. And when we are confident that it’s durable, it will be appropriate.

So we’ll see what decision date that actually happens on. But the message is we’re moving in the right direction. We are getting closer. We’re seeing what we need to see. We just need to see it for longer.

https://www.theglobeandmail.com/business/article-were-seeing-what-we-need-to-see-we-just-need-to-see-it-for-longer-tiff