BOC's Macklem: Front-loaded tightening cycles tend to be followed by softer landings

Following the Bank of Canada's (BOC) decision to hike the policy rate by 100 basis points to 2.5% in July, Governor Tiff Macklem is delivering his remarks on the policy outlook and responding to questions from the press.

Key takeaways

"Front-loading rate increases now helps avoid the need for even higher interest rates down the road."

"Front-loaded tightening cycles tend to be followed by softer landings."

"100-basis-point rate increase is very unusual and reflects unusual economic circumstances of inflation at nearly 8%."

"Strain of higher interest rates in short term will get us to the other side of this difficult period and back to normal."

"Goal is to get inflation back to 2% with a soft landing for the economy; quick rate hikes prevent inflation from becoming entrenched."

"Over half of components in the Consumer Price Index are rising above 5%."

"We are projecting a soft landing, but the path to that has narrowed because of elevated and persistent inflation."

"Credibility of the bank's inflation target is being tested but remains credible overall."

Market reaction

USD/CAD continues to push lower on these comments and was last seen losing 0.6% on the day at 1.2944.