Temper inflation through better productivity: Bank of Canada governor

Bank of Canada Governor Tiff Macklem says higher interest rates are coming, but businesses also need to boost productivity to help keep rising prices in check over the long term.

In prepared remarks for a virtual event at the Canadian Chamber of Commerce Macklem says businesses have an important role to play by increasing investments in worker productivity to create non-inflationary growth.

He says that boosting worker productivity, which measures how much is produced in a set amount of time, is needed so that rising wages don’t lead to higher unit costs.

Macklem says that Canada has long lagged the U.S. in business investments, including in information and communication technology, though he notes that there are signs of increased spending on the way.

He says businesses will also need to lean into the flexible and remote working arrangements created by the pandemic to allow access to a wider labour pool, while workers will also need to be prepared to keep their skills fresh.

The bank signalled on Jan. 26 that higher interest rates are coming to bring inflation down from its current rate of close to 5%. Its next scheduled rate decision is March 2.

The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.