Tiff Macklem is wearing an Edmonton Oilers pin as he reflects on coming very close to beating big odds.
It’s a significant day for the governor of the Bank of Canada: he’s just laid out his reasons to the entire country and a global audience for keeping the central bank’s benchmark interest rate steady for a second straight time.
That night is also Game 1 of the NHL’s Stanley Cup finals; Macklem ends his press conference with a hearty “Go Oilers!”
It’s a rematch from last year’s heartbreak, when the Oilers came oh-so-close to mounting a seemingly impossible four-game comeback against the Florida Panthers, only to fall short by a single goal in Game 7.
Macklem, too, was almost safe to declare victory last year.
He had just about secured a coveted “soft landing” for Canada’s economy — a rare feat that sees restrictive monetary policy bring down surging levels of inflation without tipping the economy into a prolonged downturn.
“We got inflation down. We didn’t cause a recession,” Macklem said in an interview with The Canadian Press after the rate announcement Wednesday.
“And, to be frank, until President (Donald) Trump started threatening the economy with new tariffs, we were actually seeing growth pick up.”
Fresh out of one crisis, the central bank now must contend with another in U.S. tariffs.
Five years into his tenure as head of the Bank of Canada, Macklem said he sees the central bank’s role in stickhandling the economy — as well as Canada’s role on the world stage — evolving.
Many Canadians have become more familiar with the Bank of Canada in recent years. After the COVID-19 pandemic recovery ignited inflation, the central bank’s rapid tightening cycle and subsequent rate cuts were top-line news for anxious Canadians stressed about rising prices and borrowing costs.
That was all in pursuit of meeting the central bank’s inflation target of two per cent, part of a mandate from the federal government that’s up for review next year.
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Macklem said the past few years have led the Bank of Canada to scrutinize some of its metrics, like core inflation and how it responds to supply shocks in the economy.
But he defends keeping the bank’s inflation target, particularly at a time of global upheaval.
“Our flexible inflation targeting framework has just been through the biggest test it’s ever had in the 30 years since we announced the inflation target,” he said.
“I’m not going to pretend it’s been an easy few years for anybody. But I think the framework has performed well.”
Macklem said, however, that he sees room to build out the mandate to address other areas of concern from Canadians, such as housing affordability.
Whether it’s the high cost of rent or a mortgage, or surging prices for groceries and vehicles, Macklem said the past few years have been eye-opening to Canadians who weren’t around the last time inflation hit double digits in the 1980s.
“Unfortunately, a whole new generation of Canadians now know what inflation feels like, and they didn’t like it one bit,” he said.
Monetary policy itself can’t make homes more affordable, he noted — in a nutshell, high interest rates make mortgages more expensive while low rates can push up the price of housing itself because they stoke demand.
But Macklem said one of the things he’s reflecting on is that inflation can get worse when the economy isn’t operating at its potential or when it’s facing great disruption.
“There is a role for monetary policy to smooth out some of that adjustment — support the economy while ensuring that inflation is well-controlled.”
He didn’t offer suggestions on how the mandate might expand to address housing affordability specifically, but said “the work is ongoing” and will be settled in meetings with the federal government next year.
Right now, he’s trying to make sure that the economic impacts from Canada’s tariff dispute with the United States don’t result in prolonged inflation.
The Bank of Canada is not alone in debating how monetary policy ought to respond in what Macklem called a more “shock-prone” world.
The G7 Finance Ministers’ Summit in Kananaskis, Alta., last month also featured roundtables with the bloc’s central bankers.
Conversations at the summit were “candid,” Macklem said, and though the nations issued a joint statement at the close of the event, that doesn’t mean they agreed on everything.
“International co-operation, to be honest, has never been easy. It is particularly difficult right now, but that doesn’t make it less important. That makes it more important,” he said.
“I do think Canada, as the chair of the G7, has a leadership role to play.”
The Bank of Canada is also changing the way it has conversations with Canadians and the kind of data it considers.
A day after the June interest rate decision, deputy governor Sharon Kozicki told a Toronto business crowd how the central bank is using data more nimbly, relying heavily on surveys and more granular information to make monetary policy decisions in an uncertain time. These sources offer a faster way to see what’s happening on the ground in the economy than traditional statistical models allow.
Macklem said the central bank would previously have dismissed most supply shocks as transitory — likely to pass without the need for central bank adjustments, such as rising and falling oil prices.
But he said the Bank of Canada needs to be running a more “nuanced playbook” now to respond to some increasingly common shocks: supply chain disruptions, trade conflicts and extreme weather to name a few.
An overheating economy running up against a supply disruption is the kind of inflationary fire Macklem is trying to avoid in this latest crisis.
“The economy does not work well when inflation is high,” he said.
“And the primary role of the Bank of Canada is to ensure that Canadians maintain confidence in price stability. That’s all we can do for the Canadian economy. That’s what we can do for Canadians. And that’s what we’re focused on.”
Later in the day on Wednesday, the Edmonton Oilers took Game 1 of the Stanley Cup finals. The Canadian team was down but roared back to win 4-3 in overtime.
It’s still early in the Bank of Canada’s response to the latest global shock. But with any luck, Macklem’s team might also get a leg up with lessons learned the last time they faced big odds.
