Economy can still create jobs and growth despite slowing inflation

During a speech to the Winnipeg Chamber of Commerce, Bank of Canada Governor Tiff Macklem expressed that there is still room for growth and job creation in the Canadian labor market, even as inflation rates decline. He acknowledged that some groups, such as young workers and newcomers, are having difficulty finding employment.

Macklem emphasized that the bank believes there is slack in the economy, allowing for more job opportunities despite inflation moving closer to the 2% target. He mentioned that the bank does not anticipate a significant rise in the jobless rate to achieve the inflation target, aiming for a soft-landing scenario.

Newcomers facing challenges in the job market could be beneficial for the federal government as it looks to control accommodation costs and population growth. Macklem suggested that slowing the growth of non-permanent residents could help prevent labor shortages.

Although the bank has been concerned about wage growth, Macklem mentioned signs of moderation. He did not provide a timeline for further easing measures, and before his speech, markets were anticipating another rate cut in July. The annual inflation rate recently reached a three-year low of 2.7%, and Statistics Canada is set to release the May inflation data soon.

The Bank of Canada’s next monetary policy decision is scheduled for July 24, where updated economic forecasts will be provided. Macklem’s remarks indicate a cautious approach to balancing economic growth with inflation targets.