Fergal Smith

TORONTO, (Reuters) – Tiff Macklem, Bank of Canada Governor said that supply pressures were not easing on Thursday. The central bank will monitor the effect of rising interest rates on inflation and decide how tightening policy is necessary.

Supply chain disruptions are causing price rises around the world. Wednesday’s data shows that Canada’s inflation rate increased to 6.7% in March, which is a new record high for Canada.

Macklem said that “these supply disruptions” were not easing and spoke to reporters at a live news conference after attending the G20/IMF meeting in Washington.

“We are aware that the war not only disrupts already fragile supply chain, but also further damages them. “COVID lockdowns by China in China create a new level uncertainty.”

Last week the BoC increased its benchmark rate by 50%, marking its highest single rise in nearly two decades. Additionally, it opened the doors to raising interest rates higher than a neutral setting. For the first time, in fourteen years, it has estimated that they will raise them as high as 2% or 3%. On June 1, the BoC will make its next policy decision.

The central bank will use quarterly quarter-overquarter inflation rates to determine how much interest rate they should raise.

If we see domestic demand pressures starting to ease and international price pressures decreasing, then you will see quarter-over-quarter inflation rates begin to fall.”

According to the central bank, inflation in annualized quarters will drop from 6% to 2.5% during the second quarter of this year.