Macklem: Canada’s ‘fiscal track’ remains largely unchanged

OTTAWA – Bank of Canada governor Tiff Macklem reassured Canadians that the country’s fiscal position remains stable despite the new spending measures outlined in the federal government’s budget. Speaking at the International Monetary Fund and World Bank spring meetings in Washington, Macklem highlighted the positive impact of increased revenue streams and higher-than-expected economic growth on Canada’s financial outlook.

“The budget does respect the fiscal guardrails that the government put in place,” Macklem stated, emphasizing the importance of keeping the debt-to-GDP ratio on a declining track and deficits below one per cent of GDP in the coming years. The federal budget includes $39.2 billion in net-new spending, with the deficit projected to decrease to $20 billion by 2028-29.

Macklem also addressed the recent rise in inflation, attributing it primarily to increased gas prices. While the Bank of Canada anticipates inflation to remain around three per cent for the first half of the year before gradually decreasing, geopolitical tensions in the Middle East and Ukraine pose a significant risk to the inflation outlook.

The governor acknowledged the potential impact of oil price spikes on Canada’s economy, particularly in light of recent events in the Middle East. “I expect we will continue to see volatility as events play out, unfortunately that’s inevitable,” Macklem commented. The central bank will closely monitor these developments and incorporate them into its monetary policy report in July.

Overall, Macklem’s assessment of Canada’s fiscal position and inflation outlook provides a sense of cautious optimism amidst global uncertainties.