Tiff Macklem: Monetary policy at work

Remarks by Mr Tiff Macklem, Governor of the Bank of Canada, at the CFA Quebec, Quebec, 7 February 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good afternoon. It's a pleasure to be here in Québec to speak to you about monetary policy and the economy. As we approach the three-year mark of the COVID-19 pandemic in Canada, we are also entering a new phase in monetary policy.

In 2022, we faced an overheated economy and high inflation, and we responded forcefully, increasing our policy interest rate rapidly. The year ahead will be different. In January, after eight consecutive interest rate increases, we said that we expect to hold the policy rate at its current level, conditional on the outlook for inflation. We are pausing to assess how well our interest rate increases are working to bring inflation down. With inflation above 6%, we are still a long way from the 2% target. But inflation is turning the corner. Monetary policy is working.

That's what I'd like to talk about today-how, exactly, monetary policy works to control inflation. I'll outline what we've done so far, what the impact has been and what we expect going forward. I also want to talk about the risks and uncertainties that we are facing as we work to get inflation back to target.

Canadians know inflation is high. They see it at the grocery store, when they pay their rent and when they go to a restaurant or on a trip. And they know that we've increased interest rates. They see that in higher costs for borrowing-in mortgage rates, lines of credit and business loans.