Challenges and Opportunities: Canada's Central Bank Chief on Global Uncertainty

Tiff Macklem, the Governor of the Bank of Canada, highlights in a speech the increasing uncertainties in the global economy, exacerbated by trade threats from the United States. The global economic security must be strengthened through the cooperation of developed countries, according to his urgent appeal. In Vancouver, Macklem stated that rising national debts, higher long-term interest rates, and slower growth make the world more vulnerable. Additionally, geopolitical tensions, wars, and growing protectionism contribute to the risks. Canada will host the G-7 summit in 2025, which Macklem describes as an opportunity to act as a leader in the global community. In the meantime, the Canadian central bank has once again lowered interest rates to stabilize the economic situation. Macklem emphasized that a slower approach to monetary policy could be pursued if the economy develops as expected. He anticipates that inflation will be close to the 2% target in the coming years but warns of domestic risks that could affect this scenario. Specifically, rising wages coupled with weak productivity could increase price pressure, or below-average economic growth could lower inflation. Macklem also directed attention to the negative international ramifications that can arise when the policy decisions of one country affect other nations. At the same time, he highlighted the positive cooperation, such as the collaboration of major central banks to combat global inflationary pressure after the pandemic. He expressed concern over Donald Trump's threat to impose 25% tariffs on Canadian goods, which makes the future appear more uncertain. Trade protectionism and economic fragmentation are increasing, while interest in global cooperation is waning, leading to additional costs and uncertainty for investments. In conclusion, Macklem stated that the bank has almost completed its review of the instruments used during the pandemic. The hurdles for the renewed use of such measures should remain high in the future.