The Bank of Canada’s interest rate cut last week—its second in two months—came with a new sense of urgency and fresh warnings from the central bank about the near-term state of the nation’s economy.
In his comments to reporters after the rate decision on Wednesday, Governor Tiff Macklem indicated his focus is turning toward spurring growth rather than worrying about inflation, which still remains above the central bank’s 2 percent target. He declared that it would be “reasonable” to expect more cuts.
“The downside risks are taking on increased weight in our monetary policy deliberations,” Macklem said. The aim is clear: to alleviate the financial burden on indebted households and stimulate spending to address the growing economic slack.
“We need growth to pick up,” Macklem said.
Yet, the Bank of Canada’s new forecasts continue to tell a somewhat different story. Growth isn’t just anticipated; it’s imminent and robust.
The Bank projects a 2.8 percent annualized growth rate for the current quarter, the fastest in more than a year. This momentum is expected to carry into 2025, when growth is expected to average at just over 2 percent, before accelerating in 2026 to 2.4 percent. These projections are solid, outpacing the average growth of the past two decades.
So why the anxiety from Macklem?
