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Solving supply problems is not a substitute for rate hikes: BoC official


Bank of Canada Senior Deputy Governor Carolyn Rogers said addressing supply issues could help ease inflationary pressures, but such policies would not replace the need for higher interest rates.

Rogers and Bank of Canada Governor Tiff Macklem appeared before the Senate Banking Committee on Tuesday evening and answered questions from senators about the bank’s monetary policy and the state of the economy.

In his opening remarks, Macklem reiterated the need for higher interest rates to calm inflation, but said the end of the monetary policy tightening cycle was nearing its end.

“If we don’t do enough, Canadians will continue to struggle with high inflation,” Macklem said.

Officials were asked if the government could play a role in tackling high inflation, and in response, Rogers said policies that address supply issues would help bring inflation down.

Rogers added that such policies, however, would be complementary to interest rate hikes, not substitutes.

“We have to do our job, other decision makers have to do their job,” she said.

Last week, the central bank raised interest rates for the sixth straight time this year, raising its key rate by half a percentage point and signaling that rates are likely to rise further.

Canada’s annual inflation rate was 6.9% in September, but it has fallen steadily since hitting its highest rate this year of 8.1% in June.

The Bank of Canada also released its latest monetary policy report last week, which suggests that the Canadian economy is heading for a significant slowdown towards the end of the year and into the first half of 2023.

Bank of Canada officials are usually called to testify after the release of the April and October monetary policy reports.

This report from The Canadian Press was first published on November 1, 2022.

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