Macklem Says Federal Spending Isn’t Stoking Inflation

Bank of Canada Governor Tiff Macklem told lawmakers that current federal spending is not materially adding to inflation or working against the central bank’s efforts to return inflation to its 2% target. He said the bank would speak out if government finances became unsustainable and disrupted markets, or if fiscal policy made controlling inflation harder; he said neither condition currently applies. Macklem pointed to excess capacity in the economy and said the composition of spending matters, including whether it supports investment. His comments came as the government prepared to release its budget, after the central bank raised its policy rate to 2.5% and reiterated that further increases could be needed.