Band of Canada says there’s a limit to how far US and Canada rates can diverge

May 2, 2024
Category: Finance & Economics
Region: Canada, United States

Tiff Macklem

OTTAWA — There is a limit to how far U.S. and Canadian interest rates can diverge but “certainly we’re not close to that limit”, Bank of Canada Governor Tiff Macklem said. Macklem reiterated that the central bank was waiting to see whether recent drops in underlying inflation would be sustained before starting to cut rates from a 23-year high of 5%. But in the US, by far Canada’s largest trading partner, the Federal Reserve on Wednesday highlighted recent disappointing inflation readings that could ensure rate cuts south of the border come at a slower pace. …Macklem reiterated that tighter monetary policy was having more of an impact in Canada than in the US, given higher rates of household debt and the fact that most mortgages in Canada have to be renewed every five years. Inflation is currently at 2.9% – still well above the central bank’s 2% target.

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