(OTTAWA) Bank of Canada Governor Tiff Macklem said the central bank kept its key interest rate at 5% as next month’s wave of mortgage renewals weigh on the economy for years to come.
Mr. Macklem appeared before a Senate committee Wednesday, along with Deputy Governor Carolyn Rogers, following the Bank of Canada’s latest decision on interest rates and monetary policy.
The governor explained that the central bank kept its key rate on hold because it knew the effects of previous rate hikes, including mortgage renewals, were still rippling through the economy.
One of the main reasons we kept our policy rate at 5% is because we know these recoveries are coming. So we know there’s more to come than what we’ve already done. That’s why we expect low growth.
Tiff Macklem, Governor of the Bank of Canada
As more people renew their mortgages at higher interest rates, the household rate impact is expected to increase more directly, further slowing the economy.
Mr. Bank of Canada does not want to see the country enter a recession, but needs to slow growth to combat inflation. Macklem emphasized.
“We want to avoid recession,” the governor reiterated in French.
In its latest monetary policy report, the central bank lowered its forecast for economic growth and raised its forecast for short-term inflation. The Bank of Canada still expects inflation to return to 2% in 2025.
Recent data from Statistics Canada suggests the economy may have slipped into a mild technical recession, with rising interest rates weighing on household spending.