(Reuters) – Bank of Canada Governor Tiff Macklem has opened the door to accelerating interest rate cuts, the Financial Times reported on Sunday.
Macklem told the newspaper in an interview that ratemakers are concerned about the Canadian labor market and the potential for lower oil prices to hit the economy.
“As you get closer to the [inflation] target, it changes your risk management calculus,” Macklem told the newspaper. “You’re more concerned about downside risks. And the labor market is pointing to some downside risks.”
The BoC has kept its key policy rate at 5% for a year, the highest level in more than two decades. However, since June, the bank has cut it by a quarter point three times in a row. Earlier this month, the rate fell by 75 basis points to 4.25%.
Headline inflation in Canada fell to 2.5% in July, the lowest level in 40 months.
Macklem said last week that while the bank was seeing stronger growth, there were also some downside risks to the expected recovery.
“Trade disruptions could lead to larger deviations in inflation from the 2% target,” he said in a speech to the Canada-UK Chamber of Commerce in London.
(Reporting by Gnaneshwar Rajan in Bengaluru; Editing by Edmund Klamann and Susan Fenton)
