(Ottawa) Bank of Canada Governor Tiff Macklem says the central bank has kept its key interest rate at 5% in part because of the effect that a wave of mortgage renewals coming in the coming years month should have on the economy.
Mr. Macklem appeared before a Senate committee on Wednesday alongside Deputy Governor Carolyn Rogers, following the Bank of Canada’s latest decision on interest rates and monetary policy.
The governor explained that the central bank maintained its key rate because it knows that the effects of previous rate hikes are still rippling through the economy, including through mortgage renewals.
One of the important reasons we’ve kept our policy rate at 5% is because we know these renewals are coming. So we know there’s more to come than we’ve already done. This is why we expect lower growth.
Tiff Macklem, Governor of the Bank of Canada
As more people renew their mortgages at higher interest rates, households are expected to feel the impact of rate increases more directly, causing the economy to slow more.
Mr. Macklem stressed that the Bank of Canada does not want to see the country enter a recession, but that a period of slower growth is necessary to combat inflation.
“We want to avoid a recession,” the governor reiterated in French.
In its latest monetary policy report, the central bank lowered its forecast for economic growth and increased its forecast for short-term inflation. The Bank of Canada still expects inflation to return to 2% in 2025.
Recent data from Statistics Canada suggests the economy may have slipped into a mild technical recession, as rising interest rates weigh on household spending.