By Paul Vieira
OTTAWA--Bank of Canada Gov. Tiff Macklem said Friday he expects inflation accelerated in March, although likely below 3%, and that officials will pay close attention to medium- and longer-term inflation expectations when deciding whether rate hikes are necessary.
The central bank does not "want to jump too early and raise interest rates and lower growth, particularly when growth is already weak. On the other hand, you don't want to be late and let inflation get a hold and become entrenched," Macklem told reporters from Washington, where he attended the spring meetings of the International Monetary Fund and World Bank.
Statistics Canada is scheduled to release inflation data for March on Monday. Hours later, the Bank of Canada will issue its quarterly survey gauging sentiment among businesses and households, which will provide the first clue about inflation expectations.
Businesses are influenced by their expectations for inflation when it comes to wage negotiations, price setting and financial contracting for investment. For households, expectations on prices will influence spending and savings. Well-anchored inflation expectations help central banks attain their inflation targets, which is 2% for the Bank of Canada.
Macklem said he is not too worried about higher near-term inflation expectations, which will be sensitive to the sharp jump in energy prices stemming from the conflict in Iran. If businesses and households aren't confident that inflation will come back to 2% in the medium term, "then that's the sort of thing that would really worry us."
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
04-17-26 1443ET
