Bank of Canada (BoC) Governor Tiff Macklem expects inflation to be around 3% for next year and then gradually move back to the 2% target. In an interview with The Globe and Mail, he mentioned that the labor market has eased a bit but still remains very tight. He explained they need to see a better balance in the labor market and a moderation in wage growth. 

He is surprised by the ongoing strength in demand in the economy. Regarding inflation, Macklem mentioned that he is amazed by the persistence of underlying inflationary pressures.

“It’s not working as quickly or as powerfully as we thought”, said Macklem explaining why the central restarted interest rate hikes. 

Market reaction: 

USD/CAD rose further above 1.3220 following Macklem's comments. The Loonie was among the worst performers on Friday.