Bank of Canada to make rate decisions based on domestic economic situation, not markets or the Fed, says Macklem

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsEconomyBank of Canada to make rate decisions based on domestic economic situation, not markets or the Fed, says MacklemMacklem said the U.S. and Canadian economies have key differences which will lead to different interest rate decisionsLast updated 10 minutes ago Bank of Canada governor Tiff Macklem answers questions after giving a speech at the Halifax Convention Centre on Sept. 21, 2026. Photo by Ryan Taplin/The Chronicle HeraldBank of Canada governor Tiff Macklem said the central bank’s governing council will continue to make monetary policy decisions based on economic realities in Canada, rather than be influenced by Federal Reserve decisions or market predictions.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountSpeaking to reporters after a speech in Halifax on Monday, Macklem said there are key differences between the Canadian and American economies, leading to different interest rate decisions.Inflation rates in both countries have been running hot for months due to higher global oil prices from the conflict in the Middle East, which has severely reduced refining capacity the region. Canada’s inflation rate remained steady at three per cent year over year in August and July, while U.S. inflation topped 3.4 per cent annually during the same time period.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againHowever, Canada’s inflation rate gradually returned to the two per cent target in August 2024 after a post–COVID-19 inflation surge that hit a 40-year high of 8.1 per cent in June 2022. The inflation rate then hovered around that target for roughly 1.5 years before rising again in March due to the Iran war.The U.S. inflation rate never returned to the Fed’s two per cent target after the pandemic. It surged dramatically to 9.1 per cent in June 2022, a 40-year high, before gradually cooling down to three per cent in 2023. It has hovered around that mark ever since.“We can run a monetary policy in Canada that is geared to the situation in Canada, and that’s what we’re going to keep doing,” Macklem said at Monday’s news conference.His statement came after the Federal Reserve hiked its benchmark interest rate by a quarter-percentage point to a target range of 3.75 to four per cent last Wednesday, bringing the Canada–U.S. rate differential to 1.5 to 1.75 percentage points.The Bank of Canada has been sitting on the sidelines for almost a year, leaving its key interest rate at 2.25 per cent as it waits to see how the economy adjusts to the U.S. tariffs and global oil price shock.Canadian markets, however, are expecting another rate hike before year’s end due to inflationary concerns. Long-term Government of Canada bond yields reached 4.19 per cent last Friday, while 10-year bond yields reached 4.14 per cent.Most economists remain unconvinced that the central bank will raise borrowing costs this year, though concerns about inflation becoming more persistent and generalized have increased. Many expect a rate hike in early 2027.“Our new forecast expects growth to sag after the latest tariffs and trade restrictions by the United States come into effect. Softer growth is expected to drag on the labour market and maintain slack in the economy,” TD Economics wrote in a weekly update published last Friday. “Canada is also importing tighter financial conditions from the U.S. via higher bond yields. The combination of these forces underpins our expectation that the BoC will be able to stay on the sidelines.”This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Macklem said Bank of Canada officials will monitor whether the new Section 338 levies will further weaken Canadian economic growth in the first and second quarters of 2027, and whether elevated global oil prices will push the inflation rate higher for longer.“The key question we’re going to be asking ourselves is: Is the current interest rate the right one to bring inflation back to target over time, or do we need to raise the interest rate to guide inflation back to our two per cent target,” Macklem said.Macklem warned that the central bank can’t be too slow to respond if inflationary pressures become more persistent. It will be difficult for Canadians to adapt if the governing council raises rates too quickly, and it would be harder to bring the inflation rate down if the situation gets out of hand.However, if the central bank hikes rates when inflation is contained, it will weaken economic growth “for no real benefit.”“(Overnight rate changes) take time to feed through the economy, so we need to look forward and access where we think the economy is going to be,” he said.“Forecasts are inevitably not going to be exactly right, and there are going to be risks around those forecasts … We need to balance the two.”Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.