The challenge for the Bank of Canada is to try to ensure that the economy doesn’t slide into recession now that inflation has fallen below the 2 per cent target rate.
The federal bank introduced a quick succession of interest rate increases to try to stem an overheated economy and inflation soaring well above target rates.
The Bank of Canada started introducing a series of interest rate cuts earlier this year as inflation started to cool, with the last adjustment, at half a percentage point, the biggest one to-date.
Governor Tiff Macklem acknowledges that the policy adjustments have been difficult for Canadians.
“With inflation now back to target, and interest rates continuing to come down, families, businesses and communities should feel some relief. The Bank is committed to maintaining price stability for Canadians and keeping inflation close to the 2 per cent target.”
However, inflation dropped to 1.6 per cent in September, causing some worry for the Bank of Canada according to Larry Short of Short Financial, a branch of iA Private Wealth.
They’re worried that inflation may come in even lower, says Short, signaling the possibility of another rate cut in December.