As Canadians continue to feel the pressure of higher living costs, Bank of Canada Governor Tiff Macklem says Canada’s inflation rate will remain “painfully high” for the rest of the year.
Statistics Canada reported on Wednesday that the country’s annual inflation rose to 8.1 per cent in June from 7.7 per cent in May, marking the biggest annual change since January 1983.
In an exclusive interview with CTV News’ Evan Solomon, Macklem said the inflation rate is “unfortunately … it’s probably going to start at seven by the end of the year.”
“It’s going to be painfully high,” Macklem said Wednesday.
The increase in inflation last month was mainly due to higher gasoline prices. In the interview, Macklem said that gasoline prices have since come down, so he expects in a month’s time, when the National Statistics Agency releases its July inflation data, the rate will “probably come down a little bit.”
However, Macklem said demand is outpacing the economy’s ability to produce the goods people want, which will continue to create inflationary pressures.
In response to higher-than-expected inflation, the Bank of Canada raised its overnight interest rate by 100 basis points to 2.5 percent on July 13. It was the biggest rate hike by the central bank since August 1998.
The Bank of Canada’s next interest rate decision is scheduled for September 7, after StatCan’s scheduled August 16 release of its July inflation report.
In the interview, Macklem said that while getting inflation back to the two percent target was paramount, he expected the key rate to rise again “quite quickly.”
“We are deliberately front-loading our response to interest rates. We want to get ahead of that,” he said.
In the interview, Macklem also talks about what’s driving the current economic situation and whether he thinks a recession is on the horizon.
Watch CTV National News tonight for more from the exclusive interview.
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