Canadian dollar hasn’t gone up with oil prices like it usually does, complicating the Bank of Canada’s inflation fight
Bank of Canada governor Tiff Macklem said a surprisingly weak Canadian dollar is complicating his fight against inflation, and could result in higher interest rates than would have been necessary if the loonie was behaving as it has in the past.
The comments followed the central bank’s surprise decision on July 13 to increase the benchmark interest rate a full percentage point after the Bank of Canada‘s latest quarterly outlook predicted headline inflation was on track to crest eight per cent this summer, a startling number for a group of policymakers charged with keeping the consumer price index advancing at an annual pace of about two per cent.
“In terms of this decision, the fact that we haven’t seen as much appreciation of the Canadian dollar means we’ve got to do more through interest rates,” Macklem said in an exclusive interview with the Financial Post’s editor-in-chief Kevin Carmichael after the central bank announced that it had decided to push its policy rate to 2.5 per cent, the highest since 2008. “That is something we’re taking into account.”
The Canadian dollar hasn’t traded higher than 80 cents against the U.S. dollar this year, a low ceiling considering oil prices have surged well above US$100 per barrel.
For the rest of this article: https://financialpost.com/news/economy/weak-canadian-dollar-higher-interest-rates-needed-tiff-macklem