(Toronto) Bank of Canada Governor Tiff Macklem has indicated the central bank is ready to intervene if strains in the global banking system affect Canada, but stressed it will not back down in its fight against the crisis. inflation as it strives to bring inflation back to its 2% target.
In the prepared text of a speech Mr. Macklem delivered to the Greater Toronto Board of Trade on Thursday, the Governor addresses the recent strain in the global banking system that was triggered by the collapse of Silicon Valley Bank, UNITED STATES.
Macklem concedes that financial instability increases the likelihood of a deeper economic downturn, but adds that achieving both financial stability and price stability is important, and the two are linked.
The governor stresses that the central bank has distinct tools to respond to the two mandates and that it will take into account the interaction effects between financial stress and inflation.
If the financial strains were to lead to tighter borrowing conditions that would make loans more expensive and harder to obtain, he says the governing board would take that into account when setting the policy rate.
But while inflation has come down significantly from its peak of 8.1% last summer, Macklem says the Bank of Canada’s efforts aren’t over yet and there’s still work to be done. before it drops below 3%.
