Bank of Canada governor raises prospect of faster rate cuts, FT reports

OTTAWA (Reuters): Bank of Canada Governor Tiff Macklem has opened the door to stepping up the pace of interest rate cuts, the Financial Times reported on Sunday.

Macklem told the newspaper in an interview that rate-setters are concerned about Canada’s labor market and the possibility of lower oil prices hitting the economy.

“As you get closer to the [inflation] target, your risk management calculus changes,” Macklem told the newspaper. “You become more concerned about the downside risks. And the labor market is pointing to some downside risks.”

The BoC, after keeping its key policy rate at 5%, a more than two-decade high, for a year, has trimmed it by a quarter point three times in a row since June, bringing it down by 75 basis points to 4.25% earlier this month.

Overall inflation in Canada in July fell to a 40-month low of 2.5%.

Macklem said last week that while the bank saw growth strengthening, there were some downside risks to the expected pick-up.

“Trade disruptions may mean larger deviations of inflation from the 2% target,” he said in a speech to the Canada-UK Chamber of Commerce in London.