Insights from the head of the Bank of Canada's speech on rates and economic growth

At a press conference, Tiff Macklem, head of the Bank, said about the continuation of quantitative tightening, which supplements the increase in the key rate. Also, he said that further increases in the discount rate are expected. According to him, the rest will depend on methods of slowing demand through monetary policy, ways to solve the supply problem, and the inflation reaction and inflation expectations for this tightening cycle. This is the sixth consecutive increase since March.

There are several reasons for today's decision:

First, inflation in Canada remains at the same high level and is widely spread. Inflation has fallen in recent months, but a general reduction in price pressures is still expected.

Second, the economy is still oversupplied and overheated. The economic capacity to produce goods and services does not match the willingness of households and businesses to purchase them. They are less. This causes a rise in prices.

Third, higher interest rates started to hold down economic growth. This is more evident in economic sectors that are sensitive to interest rates, such as real estate and spending on high-value goods. It will take time for the impact of higher rates to diffuse into other sectors of the economy.