Toronto, Oct. 10 (BNA) Bank of Canada Governor Teff McClem said there is scope to slow the economy based on an “exceptionally large number” of job vacancies in the labor market.
In an interview broadcast on CBC Radio on Sunday, McClem said the current fight against inflation is the biggest test the central bank has faced since it began targeting inflation 30 years ago.
But he assured Canadians that monetary policy was working and expected inflation to return to the central bank’s 2% target by 2024. Canada’s headline inflation rate fell to 7.0% in August, with core inflation hovering around 5%.
“We need to cool the economy, (but) we don’t want to over-cool the economy,” McClem said.
He added, “When we look at the economy at the moment, there are an exceptionally high number of vacancies … and this is a clear indication that there is room to slow down the economy, without putting a lot of people out of work.”
Data released Friday showed that Canadian employers were actively looking to fill nearly a million jobs as of July, while the vacancy rate fell to 5.4% in July, from a peak of 6.0% in April 2022.
The Bank of Canada has raised its benchmark interest rate by 300 basis points since March, one of its tightest and fastest ever tightening cycles. Economists and money markets are leaning towards a 50 basis point increase on October 26.
McClem said parts of the economy sensitive to higher interest rates are starting to slow.
“Let me be clear, what we don’t want is … inflation and wages become uncorrelated with our 2% target, because if that happens, we’ll actually need to slow the economy a lot to get inflation back to 2%, and that’s what we call loading price increases Our interest.”
MI