Macklem says 2024 likely to be `transition' year as economy slows, inflation falls

Bank of Canada governor Tiff Macklem says he expects 2024 to be a transition year as higher interest rates slow down the economy, making way for lower inflation.

In his final speech of the year, the governor lays out his expectations for a softer economy next year and offers some criteria that must be met for the central bank to start discussing rate cuts.

Macklem says higher borrowing costs will restrain spending, limit growth and employment, a price that the economy needs to pay to get inflation down. Once the central bank is sure inflation is on a clear path back to two per cent, Macklem says it will start considering rate cuts. Until then, the governor says the central bank will continue to debate whether interest rates are high enough to restore price stability.

He notes that the world is experiencing increased economic volatility, which requires central banks to be nimble.