Ottawa, 12 March (Reuters) – The Bank of Canada released the following text of opening comments by Governor Tiff Macklem on Wednesday:
‘Good morning. I am happy to be here with senior deputy governor Carolyn Rogers to discuss our policy decision.
“Today we reduced the policy interest by 25 basic points, which brought it to 2.75%.
“The Canadian economy finished 2024 in good condition. Since last summer, inflation has been close to the objective of 2%. Since last summer. Significant cuts on our policy percentage during the second half of last year increased household expenses and economic growth.
“In recent months, however, the omnipresent uncertainty created by continuously changing American tariff threats has described the business community and consumer confidence. This is limiting the intentions of household spending and the plans of companies to rent and invest.
“Against this background, and with inflation in the vicinity of 2%, the board of directors decided to reduce the policy percentage another 25 basis points.
“Looking ahead that the trade conflict with the United States is expected to weigh on economic activity, while also increasing prices and inflation. The Board of Directors will carefully continue with further changes to our policy rate
The need to assess both the upward pressure on the inflation of higher costs and the downward pressure of a weaker question.
“Let me expand these important considerations.
“Economic data since our Monetary Policy Report (MPR) of January suggests that the Canadian economy 2024 ended on a stronger foot than we expected. Reducings from the past have increased consumer expenses and business investments, which increases domestic demand in the fourth quarter with a robust 5.6%.
grew 2.6% in the fourth quarter after an upward revised growth of 2.2% in the third quarter. This growth path is considerably stronger than we expected based on the information we had in January.
“The growth of the jobs was also reinforced around the end of the year before they retain in February. The growth of employment increased in November to January, so that the growth of the workers was surpassed and the unemployment percentage fell to 6.6%. There were also signs that the wage growing is fashionable.
“Inflation has remained close to the goal of 2%. The temporary GST/HST holiday has reduced a few consumer prices, but the inflation of January came in a bit firmer than expected by 1.9%. Inflation is expected to increase to about 2½% in March
with the end of the tax benefits.
“Today we have published new survey data about what we hear from companies and households. Although it is too early to see a great impact of new rates on economic activities, our surveys suggest that threats of new rates and uncertainty about the trade relationship in Canada-us already have a big one
Impact on the intentions of companies and consumers.
“Canadians are more concerned about their job security and financial health as a result of trade tensions, and they plan to spend more care. The concern of job security has increased in particular among employees in export -oriented
Industries, including production, mining and oil and gas.
“Companies have reduced their sales prospects, in particular in production and in sectors that depend on discretionary spending by households. Credit has become more difficult for some companies, and with a weaker Canadian dollar the costs of imported machines and equipment have risen.
The result of all these trade-related factors have reduced their recruitment and investment plans.
“Our surveys also suggest that the business intentions to increase prices have risen as they deal with higher costs with regard to both uncertainty and rates. At the same time, inflation expectations have risen as the Canadians are braced for the possibility of higher prices.
“The recent shift in consumer and business intentions is expected to translate into a clear delay in domestic demand in the first quarter of this year. At the same time, Merchandise can suggest companies on both sides of the
The Canadian border has the entry in stock prior to the rates. As a result, it is expected that Canadian exports and imports will be stronger in the first quarter. But the impact on export seems to be greater, which should offer some
Offset for a weaker domestic question in the quarter.
“Of course, this pull-forward in export probably means weakness for the tree trunk. If the intentions of households and business expenses remain, the combination of weaker export and soft domestic demand would further weigh on economic activity in the second quarter.
“The effects of uncertainty and rates on inflation are more difficult to assess. Uncertainty that weighs on household and business expenditure tends to exert downward pressure on inflation. And new rates will harm and weaken new rates
Business investment. But the costs also rise, and this will exert upward pressure on inflation. A weaker Canadian dollar and new retribution rates make the import both more expensive. Companies also tell us that uncertainty itself
imposes new costs.
“It will take some time for the effects of higher costs and a weaker demand to make its way through the economy and the prices that can be confronted with Canadians. The Executive Board will train the impact of cost pressure to consumer prices. We will also monitor the inflation expectations carefully. It is good to ensure.
“Let me finish.
“We finished 2024 on a solid economic foot. But we are now confronted with a new crisis. Depending on the size and duration of new American rates, the economic impact can be serious. The uncertainty alone causes damage.
“Monetary policy cannot compensate for the effects of a trade war. What it can and should do is ensure that higher prices will not lead to continuous inflation. The focus of the administrative council will be on assessing the timing and strength of both the downward pressure on the inflation of a weaker economy and the Opwaartse
Pressure of higher costs.
“As always, the bank will be led by our monetary policy framework and our dedication to maintain price stability over time.
“With that, the senior deputy governor and I would like to answer your questions.”
(Reporting by David Ljunggren, editing by Promit Mukherjee)
((Reuters Ottawa Bureau; david.ljunggren@tr.com)))
Keywords: Canada Cenbank/Macklem
