Bank of Canada's Macklem sees a modest rate hike as a major risk for the economy

Tiff Macklem, governor of the Bank of Canada, said that a sharp rise in interest rates is likely to push the country into a deeper recession. But the central bank's failure to tackle inflation presents greater risks to the economy of Canada. 

In his speech in Vancouver, Macklem stated that the regulator is trying to find a balance between excessive and insufficient monetary tightening. If inflation persists, the Central Bank is going to move rates higher than previously expected. This is aimed at restoring price stability in the country. But a sharp rate rise can be followed by a significant slowdown in economic growth. 

Currently, the Bank of Canada is considering adjustments to the rate hike. Macklem's comments suggest that the regulator is likely to push up the cost of borrowing for fear that it might lose control of inflation expectations.