Tiff Macklem
Bank of Canada

Bank of Canada governor Tiff Macklem says he is pleased that inflation has fallen to 2%, but the central bank now has to “stick the landing” and keep price growth centred around the target.

That’s according to prepared remarks the governor delivered in Toronto on Tuesday at an event hosted by the Institute of International Finance and the Canadian Bankers Association.

“It has been a long journey. Now we want to keep inflation close to the centre of the 1–3% inflation-control band,” Macklem said.

The governor said it’s reasonable to expect more interest rate cuts, given the progress made on inflation. He said the pace and timing of cuts will depend on the central bank’s evaluation of the economic data.

Statistics Canada reported last week that the annual inflation rate 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 as well as shelter price growth cool 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 larger interest rate cuts now that inflation is back at the 2% target.

CIBC is forecasting the central bank will lower its policy rate by another two percentage points by the middle of next year. Its forecast includes two half-percentage point rate cuts to get there.

The Bank of Canada’s next interest rate announcement is scheduled for Oct. 23.

The governor also said in his speech that the Bank of Canada is scaling back its work on a central bank digital currency, noting there is not a “compelling case” for one right now in Canada.