Tiff Macklem, governor of the Bank of Canada, recently found himself in the dual role of central banker and hockey fan, sporting an Edmonton Oilers pin as he addressed the nation about the central bank’s steady interest rates. This moment coincided with Game 1 of the NHL Stanley Cup finals—a significant event given the Oilers’ near miss last year. Macklem used this opportunity to reflect on the challenges facing the Canadian economy, particularly highlighting a moment of near success in achieving a “soft landing” for the economy. This term refers to successfully controlling inflation without causing a recession, a feat Macklem felt was almost achieved until external pressures, like U.S. tariffs, threatened stability.
Since taking office five years ago, Macklem has witnessed the evolution of the Bank of Canada’s role amid economic challenges. The COVID-19 pandemic spurred changes in inflation and necessitated rapid rate adjustments that directly affected Canadians’ borrowing costs. The Bank’s primary mandate—keeping inflation within a target of two percent—is currently under review, and Macklem expressed the importance of retaining this goal, especially in today’s unpredictable economic landscape. The past few turbulent years have led to a broader conversation in Canada about inflation and its impact on citizens unfamiliar with high rates, a situation reminiscent of the inflation crises in the 1980s.
Macklem acknowledged that while monetary policy alone cannot resolve issues like housing affordability, it can play a role in mitigating economic disruptions that fuel inflation. He pointed out rising costs related to housing, groceries, and other essentials have resonated deeply with Canadians, making them more acutely aware of the ramifications of inflation. While the Bank’s policies might seem indirectly linked to these issues, Macklem emphasized ongoing efforts to reassess the Bank’s mandate to incorporate broader economic concerns by collaborating with the federal government.
As global economic landscapes shift, Macklem noted that the ability of the Bank of Canada to manage its monetary policy effectively is underscored by external shocks—whether from supply chain issues, trade disputes, or environmental crises. His discussions at events like the G7 Finance Ministers’ Summit echoed this sentiment, highlighting the importance of international cooperation amidst growing tensions. While consensus on every issue remains elusive, Macklem reiterated Canada’s leadership role, especially as chair of the G7, to foster collaboration on such pressing economic matters.
As the Bank of Canada adapts its approach, including refining data collection and analysis methods, Macklem mentioned a shift towards utilizing surveys and real-time information to better understand the economy. This new model contrasts with a tendency in the past to view supply shocks as temporary. By adopting a more flexible and nuanced playbook, the Bank aims to navigate through factors contributing to inflation more adeptly, reducing the risk of an economic meltdown when disruptions occur.
Ultimately, Macklem concluded by asserting the Bank’s central mission amidst these challenges: to maintain Canadians’ confidence in price stability. The day’s events, capped off by an Edmonton Oilers victory in the Stanley Cup finals, mirrored the hopefulness that economic strategies and lessons learned from past challenges could translate into future successes for Canada’s economy—an outcome Macklem is keen to pursue.
