Bank of Canada Governor Tiff Macklem forecasts a soft landing for the country’s economy, suggesting that a modest rise in unemployment will suffice to meet the inflation target. Speaking in Winnipeg, Macklem noted that May’s 6.2% unemployment rate is near pre-pandemic levels. He emphasized that a significant increase in unemployment is unnecessary to bring inflation back to the 2% target.
Macklem acknowledged the labor market’s rebalancing, which has made job hunting more challenging, particularly for young workers and newcomers. He expressed confidence that the cooling labor market would help moderate inflation without stifling economic growth.
Despite sticky wage growth, Macklem expects compensation pressures to ease as the labor market adjusts. He also hinted at potential interest rate cuts if inflation continues to decrease but warned against reducing borrowing costs too rapidly.
Looking ahead, Macklem underscored the importance of investing in an inclusive labor market, smart immigration policies, and a strong education system to address productivity challenges.