Canada has the possibility to slow down the economy

Bank of Canada Governor Tiff Macklem said there was room to slow the economy based on the "extraordinarily high number" of job openings in the labor market.

In an interview broadcast Sunday on CBC Radio, Macklem said the current inflation challenge is the biggest test the central bank has faced since it began targeting inflation 30 years ago. But he reassured Canadians that monetary policy is working and said he expects inflation to return to the central bank's 2% target by 2024. Canada's headline inflation rate fell to 7.0% in August, while core inflation is hovering around 5%. "We need to cool the economy, (but) we don't want to over-cool the economy," Macklem said. "When we look at the economy right now, there are an extremely high number of job openings... that's a clear sign that there is room to slow the economy without too many people being out of work," he added. Canadian employers were actively looking to fill nearly 1 million jobs as of July, while the vacancy rate fell to 5.4% in July from a peak of 6.0% in April 2022, according to data released on Friday. The Bank of Canada has raised its benchmark interest rate by 300 basis points since March, one of the steepest and fastest tightening cycles ever. Economists and money markets are favoring a 50 basis point hike on October 26. Macklem said parts of the economy sensitive to interest rate hikes are starting to slow. "Let me be clear, what we don't want ... is for inflation and wages to move away from our 2% target, because if that happens we're going to have to slow the economy a lot more to get inflation back to 2%. That's what we call front-loading our rate hikes," Macklem added. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!