Macklem admits the central bank is thinking about another rate increase by 0.50%

On Monday, the Bank of Canada Governor Tiff Macklem said another half percent rate increase is being considered in attempt to cool down inflation showing the highest results in 30 years.

He says the decision to raise the rate by 0.50% in April (for the first time in more than 20 years) was an “unusual measure” that could be used again at the future meetings.

“We’ve made it quite clear for Canadians that they should be ready for more hikes,” – Macklem noted. “We’ll be considering another half percent increase at our next meetings.”

This is the first time the BoC’s Governor admits openly that another 0.50% rate increase is possible on June 1. According to swaps trading, such a hike is guaranteed, while markets are giving weaker forecasts of a 0.75% rise. 

However, Macklem reduced the possibility of a larger increase this time.

“I’m not ruling out any options, but an increase larger than by 0.50% would be very unusual,” – Macklem noted.

As a result, the chances for a 0.75% hike were down from more than 50% to almost one-third.

“He cooled certain market pricing for the future meeting, where an even larger increase was starting to get priced,” – Ian Pollick from CIBC said.