Bank of Canada governor Tiff Macklem says the central bank is preparing for a future that looks more uncertain and more prone to shocks.
In a speech to the Greater Vancouver Board of Trade on Monday, he said structural changes are underway in the world, including demographic shifts, technological changes, decarbonization and a move away from globalization.
“We need to use the pandemic experience to prepare for future crises,” Macklem said in a prepared text of his speech.
To that end, Macklem says the Bank of Canada is working to learn what it can from how the economy reacted to the pandemic and its aftermath.
The Bank of Canada is conducting a review of the policy actions it took to restore financial stability and support the economy during the pandemic that it plans to publish along with an assessment of an independent panel of experts.
Macklem said the spike in inflation in 2022 was a reminder that even though inflation was relatively low and stable for 30 years leading up to the pandemic, central banks cannot take public trust for granted.
“All of a sudden, people couldn’t afford the things they need. And while inflation is low once again, many prices are still a lot higher than they were before the pandemic. So, people feel ripped off. And that erodes public trust in our economic system,” he said in his speech.
The Bank of Canada has cut its key policy interest rate five times this year including last week when it reduced the benchmark by a half a percentage point to 3.25 per cent.
Macklem says the bank will be evaluating the need for further reductions in the policy rate one decision at a time and anticipates a more gradual approach to monetary policy if the economy evolves as expected.
Statistics Canada reported last month that the annual inflation rate was two per cent in Ontario, hitting the Bank of Canada’s target.
The speech by Macklem came ahead of the release of the November inflation report on Tuesday.
