Bank of Canada Governor Tiff Macklem said he was pleased with the slowdown in inflation to 2%, saying they had “arrived safely, and now need to drop anchor.”
He said officials now want to keep inflation near the center of the control range, which runs from 1 to 3 percent.
The governor was participating in an event in Toronto on Tuesday organized by the Institute of International Finance and the Canadian Bankers Association.
Mr Macklem said it was reasonable to expect further interest rate cuts, given the progress made on inflation. However, he stressed that the pace and timing of the cuts would depend on the central bank’s assessment of economic data.
Statistics Canada reported last week that annual inflation fell to 2% in August, the lowest level in more than three years.
The central bank now wants to see its core measures of inflation and house price growth slow further, the governor said.
The Bank of Canada has cut its key interest rate three times so far, bringing it to 4.25%.
Some economists are bracing for potentially deeper rate cuts now that inflation has returned to the 2% target.
CIBC also predicts that the central bank will lower its key rate by two additional percentage points by the middle of next year.
The Bank of Canada’s next interest rate announcement is scheduled for October 23.
The governor also said in his speech that the Bank of Canada was scaling back its efforts toward a central bank digital currency, noting that “there is currently no compelling case” for its creation.