Canada's economy may slow due to high vacant jobs

According to Bank of Canada Governor Tiff Macklem, the economy may slow amid a large number of job vacancies in the labor market. 

Macklem noted that authorities’ fight against inflation represented the biggest challenge for the central bank since it changed the policy to inflation targeting 30 years ago. 

However, Bank of Canada Governor assured citizens that monetary policy showed the results, and he expected inflation to return to the central bank's target of 2% by 2024. The headline inflation rate fell to 7.0% in August, with core inflation of about 5%. 

As Macklem said, cooling the economy is the prudent thing to do. At the same time, the authorities’ intention isn't to “overcool” the economy. 

According to him, there are job vacancies reaching all-time high in the labor market right now. It means that there is an opportunity to slow the economy, without thousands of people lose their jobs. 

According to data revealed Friday, employers in Canada were actively recruiting for nearly 1 million vacant positions. The job vacancy rate fell to 5.4% in July from a peak of 6.0% in April 2022. 

The Bank of Canada has hiked its trendsetting interest rate by 300 basis points since March, marking one of the sharpest cycles of policy tightening in history. It is projected to raise the rate by another 50 basis points on Oct. 26.

As reported by Macklem, those sectors of the economy that are sensitive to changes in interest rate are starting to slow. He also added that inflation and wages should be pegged to the target of 2%, otherwise, the authorities would have to slow the economy a lot more and accelerate interest rate hikes.