BOC's Macklem Downplays Fiscal Inflation as Excess Supply Tempers Future Rate Hike Needs

Bank of Canada Governor Tiff Macklem indicated that domestic excess supply is limiting inflation from federal spending, offering the central bank room to evaluate policy after recently raising interest rates. The remarks follow Macklem's earlier warnings that further rate increases might be required as energy costs push inflation expectations higher. Last week, the BOC lifted its benchmark policy rate by 25 basis points to 2.50%, its first hike since July 2023. CPI inflation is projected to reach approximately 3.5% by year-end, while markets price a 56% chance of another rate hike in December.