Bank of Canada Governor Tiff Macklem said central banks will make monetary policy decisions tailored to their own economies, meaning some countries could start cutting interest rates before others.
Mr. Macklem made the comments while speaking to reporters on the sidelines of meetings of the International Monetary Fund in Washington on Friday.
“We have all been steadfast in our commitment to restoring price stability, and we have backed those words with actions that have helped us all reduce inflation. As we enter the next phase of disinflation, countries may progress at different speeds,” the governor said.
Mr. Macklem compared the fragility of economic conditions in Canada and the European Union with the strength of the economy in the United States.
“Ultimately, we tailor our monetary policy decisions to our own national circumstances,” Macklem said.
Mr. Macklem made the remarks as economists increasingly expect Canada to begin cutting interest rates before the United States does.
The booming U.S. economy and persistent inflation are delaying observers’ expectations of a rate cut by the Federal Reserve.
Meanwhile, here in Canada, economists expect the Bank of Canada to begin lowering its key rate in June or July.
Economists were particularly encouraged by the slowdown in core inflation, which measures price pressures by excluding volatility.
The latest Consumer Price Index report released Tuesday by Statistics Canada showed annual inflation was 2.9% in March, up slightly from 2.8% in February.
The slight rise was fueled by gasoline prices, while other price pressures eased last month.
The governor noted some encouraging details in the March report, including that inflation is becoming less widespread in the economy and that core measures are slowing.
“So things are moving in the right direction,” Mr. Macklem said.
The governor’s media event was the first since Finance Minister Chrystia Freeland tabled the federal budget on Tuesday.
In response to questions about the new spending plan’s impact on inflation, the governor noted that the federal budget outlook hasn’t changed much.
But he did not want to comment directly on its impact on inflation.
“The net effect of increased spending and increased revenue is that the fiscal trajectory has not changed significantly since the fall economic statement,” he said.
Mr. Macklem said the Bank of Canada plans to analyze the spending measures in more detail to determine how the budget could affect overall inflation.
He also stressed that the federal government had respected the new budgetary safeguards presented in the fall and had promised to maintain them, which, according to him, is “useful”.