Governor, Bank of Canada
'We're committed to keeping inflation low and stable' | Bank of Canada holds key interest rate
Bank of Canada governor Tiff Macklem says that based on the data he’s seen to date, this country’s economy is weak but “it is not clearly in recession.”
Subscribe to CP24 to watch more videos: / cp24torontobreakingnews
Connect with CP24:
For the latest news: https://www.cp24.com/
For the latest videos: https://www.cp24.com/video
CP24 Live and Interactive: https://www.cp24.com/now
CP24 on Twitter: / cp24
CP24 on TikTok: / cp24breakingnews
CP24 Breakfast on Twitter: / cp24breakfast
---
CP24 is Toronto's #1 source for breaking news.
#CP24 #torontonews #canadiannews
About Tiff Macklem
Tiff Macklem, Governor of the Bank of Canada, has held the central bank's key interest rate at 2.25 per cent since October 2025, maintaining that level through decisions in April and June 2026. Macklem stated that the Canadian economy is "weak, but it is not clearly in recession," describing GDP as roughly flat over the previous 12 months. He cited the ongoing conflict in the Middle East as a factor increasing energy prices and disrupting global supply chains, which he said is weighing on global growth and pushing up inflation. Macklem also noted that the US administration continues to propose new tariffs, contributing to elevated trade policy uncertainty. Macklem outlined two contrasting risks for monetary policy, stating that if the US imposes significant new trade restrictions on Canada, the bank may need to cut the policy rate to support growth. Conversely, he said that if the Middle East conflict continues and higher energy prices lead to ongoing generalized inflation, "there may be a need for consecutive increases in the policy rate." He described the combination of economic weakness and rising inflation as a "dilemma" and said that for now, holding the rate unchanged balances those risks. Macklem also expressed encouragement about efforts to diversify Canada's economy and reduce interprovincial trade barriers, and he warned that emerging risks from artificial intelligence could increase the speed and sophistication of cyber attacks.
Transcript (8 segments)
✨ AI-enhanced transcript with speaker attribution
N
Narrator0:00
Bank of Canada Governor Tiff Macklem is speaking after the Central Bank held its benchmark rate at 2 and 1/4% for the fifth straight time. Let's listen in.
T
Tiff Macklem0:11
While helping the economy adjust to headwinds, we are committed to keeping inflation low and stable over time. Governing Council maintained the policy interest rate at 2 and 1/4%. Since our April decision, the economic impact of the ongoing conflict in the Middle East has increased. Higher energy prices and disruptions in global supply chains are weighing on global growth and pushing up inflation. At the same time, the American administration continues to propose new tariffs and trade policy uncertainty remains elevated. The Canadian economy has remained soft and inflation has increased. Monetary policy continues to be focused on ensuring higher energy prices do not turn into persistent inflation, while at the same time helping the economy adjust to headwinds. We are committed to keeping inflation low and stable over time.
So, let me expand on what we're seeing since the April Monetary Policy Report and the implications for monetary policy. The conflict in the Middle East is slowing economic activity in the Gulf region and in many oil-importing countries and sending inflation higher worldwide. At the same time, AI-related investment is boosting growth in the United States and some Asian economies and equity prices have been buoyant. In Canada, GDP edged down 0.1% in the first quarter, weaker than expected at the time of the April report. Consumer spending grew by 1.4%, but there was an unexpected pullback in government spending. Housing activity also declined, and business investment remained weak. While the labor market strengthened in May, and the unemployment rate fell to 6.6%, there's been a lot of volatility in the monthly job numbers. When you look through the bumpiness, employment in Canada is little changed since the start of the year, and the unemployment rate has been fluctuating in the 6.5 to 7% range. Recent data suggests GDP growth will resume in the second quarter with continued increases in consumer spending and more stability in the housing market. Even with some rebound in GDP growth, we expect the economy to remain in excess supply.
As anticipated, CPI inflation rose in April, reaching 2.8%. The increase reflects energy prices, both higher global oil prices and the impact of the elimination of the Canadian consumer carbon tax falling out of the 12-month rate of inflation. So far, there's been limited evidence of broad-based pass-through of higher energy prices to other consumer prices. Measures of core inflation have moved down to around 2%, and the share of CPI components growing above 3% is close to its historical average. Food price inflation moderated but remains high, and shelter inflation continued to slow. With the conflict in the Middle East persisting, oil prices have remained elevated. Market expectations have shifted up since April, and oil prices are roughly $10 a barrel higher than we assumed in the MPR. Based on this, we expect CPI inflation to hover close to 3% in coming months before easing gradually towards 2%. We'll be watching closely for evidence of a broadening in price pressures. The bank is committed to keeping inflation close to the 2% target over time. At our meeting this week, we decided to maintain the policy rate at 2 and a quarter percent. Governing Council agreed to look through the war's near-term impact on inflation, but if energy prices stay high, we will not let their effects become broad-based persistent inflation.
Economic weakness combined with rising inflation is a dilemma for monetary policy. Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent. For now, holding the policy rate unchanged balances those risks. However, uncertainty is unusually elevated, and the risks could shift. Monetary policy may need to be nimble. If the United States imposes significant new trade restrictions on Canada, we may need to cut the policy rate further to support economic growth. Alternatively, if the conflict in the Middle East continues and higher energy prices start leading to ongoing generalized inflation, monetary policy will have more work to do. That may need consecutive increases in the policy rate. Of course, these are not the only possible outcomes. The Canadian economy is working through a period of structural change.
Economic weakness combined with rising inflation is a dilemma for monetary policy. Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent. For now, holding the policy rate unchanged balances those risks. However, uncertainty is unusually elevated and the risk could shift. Monetary policy may need to be nimble. If the United States imposes significant new trade restrictions on Canada, we may need to cut the policy rate further to support economic growth. Alternatively, if the conflict in the Middle East continues and higher energy prices start leading to ongoing generalized inflation, monetary policy may have more work to do. There may be a need for consecutive increases in the policy rate. Of course, these are not the only possible scenarios. The Canadian economy is working through a period of structural change. Shifting trade relationships, the adoption of AI, and changes in demographics complicate the assessment of the economy. We're going to be watching all these developments closely and assessing their implications for growth and inflation. And as the outlook evolves, we stand ready to respond as needed. The bank is committed to ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. And with that, the two of us would be very pleased to take your questions.
M
Moderator7:33
Okay, thank you, Governor.
N
Narrator7:34
Okay, so we are just listening to Tiff Macklem, who is the governor of the Central Bank of Canada, about the benchmark rate at 2 and 1/4% that is what it's being held at. The Central Bank held its benchmark rate.