Canadian Bank Governor Tiff Macklem spoke to the Winnipeg Chamber of Commerce on Monday, emphasizing that there is still room for growth and job creation in the labor market despite declining inflation rates. In a recent announcement, the central bank lowered its key policy rate for the first time in over four years, indicating that more cuts could be expected if inflation continues to move towards the 2% target.
Macklem highlighted the challenges faced by certain groups in securing employment, such as younger workers and newcomers. He noted that achieving the 2% inflation target does not necessarily require a significant rise in the unemployment rate, explaining that this would be considered a soft-landing scenario.
The governor also acknowledged that newcomers experiencing difficulty in finding employment could assist the federal government in managing population growth and housing costs. By reducing the influx of non-permanent residents, the government could avoid labor shortages without tightening the job market excessively.
While wage growth has been a concern for the bank, Macklem suggested that there were indications of moderation in this area. However, he did not specify a timeline for potential further rate cuts. The markets were anticipating additional reductions based on current expectations.
The annual inflation rate declined to a three-year low in April, with core inflation measures also showing a decrease. Statistics Canada is set to release the May inflation data, and the Bank of Canada’s next monetary policy decision is scheduled for July 24th where economic forecasts will be updated.
