Budget 2024 won’t have much effect on inflation, Bank of Canada head says

Bank of Canada governor Tiff Macklem says he doesn’t think the federal budget tabled last month will have much of an effect on inflation.

Macklem was testifying at a Senate committee alongside senior deputy governor Carolyn Rogers on Wednesday following the central bank’s latest interest rate announcement.

The governor said the spending plan hasn’t changed the federal government’s fiscal track by much, since it’s offset by higher revenues.

“Since the government’s net fiscal plan hasn’t changed a lot, I don’t think it’ll have a big effect on our projections for the economy or inflation,” Macklem said in French.

Finance Minister Chrystia Freeland’s budget pays for new spending with higher taxes and stronger-than-expected government revenues, which kept the federal deficit in check.

Because of the higher revenues, the budget met all of the government’s promised fiscal guardrails from the fall, which Macklem has applauded.

The Bank of Canada is widely expected to begin lowering its policy interest rate in June or July, as the economy loses steam and inflation eases.

Macklem has indicated that the central bank is seeing the right trends to begin lowering interest rates, but it wants to see those trends sustained before pulling the trigger.

The Bank of Canada has been holding its key interest rate at five per cent since last summer.