Rising prices: Excess demand has disappeared, says the head of the Bank of Canada

The excess demand that has been driving up prices since inflation began has finally calmed down, according to Bank of Canada chief Tiff Macklem.

He said this on Wednesday during a speech at the Saint John Regional Chamber of Commerce in New Brunswick, a day after announcing a slowdown in inflation in October.

“We expect the economy to remain weak in the coming quarters, meaning further downward pressure on inflation is in the works,” he explained.

“In short, the excess demand in the economy that made it too easy for prices to rise has now disappeared,” Macklem added.

Inflation was 3.1% last October, well below the peak of 8.1% reached in June 2022.

The Bank of Canada then quickly raised its key interest rate to 5% to calm the economy, which should further reduce inflation.

However, Mr. Macklem acknowledged that higher interest rates could weigh on Canadians. According to him, these interest rates could now be “restrictive enough” to control inflation.

The Bank of Canada is expected to decide on its key interest rate on December 6 and decide whether to maintain its pause or opt for a cut or increase.