BOC: Gov Macklem: Future Rate Decisions Are About Balancing Risks

Asked at the opening of the post-decision press conference whether the new rate policy guidance was "rather cagey" because of a lack of conviction among BOC policymakers whether the easing in inflationary pressures is sustainable, Gov Macklem chuckles and says:

• "You're reading a lot into that...[while both a hold and a cut were considered] there was a clear consensus to cut our policy rate by 25 basis points... what tipped the balance really in favor of a cut this time was there was a clear sense that the balance of risk has shifted...the inflation picture hasn't really changed a great deal since where we were last January...earlier in the year, we saw some upward momentum in those core measures. If you look at the more recent monthly readings on the core measures, that that momentum has has come off. So yes, you know, if you look at the inflation data, there is some more comfort that some of those upward pressures we saw in underlying inflation are easing off."
• "The guidance really is we're not being as forward looking as normal, and we're paying close attention to the risks and uncertainties we demonstrated today. If those shift, we're prepared to take action."

MNI's Greg Quinn asks Gov Macklem whether the BOC is taking a risk cutting rates given elevated core inflation - Macklem repeats his earlier message: 

• "our primary mandate is to maintain low, stable inflation, and we are very focused on that....when we look at it, we see underlying headline inflation is 1.9%, underlying is running about 2.5%, some of that upward momentum we saw has eased off. So yes, we do need to consider where inflation is going at this point, inflationary pressures look a little more contained and against that background and the background of a weakening economy that will put additional downward pressure on inflation that tipped the balance of risks in favor of cutting our policy rate today. But we are proceeding carefully, we are going to be balancing those risks."

Asked what it would take to cut again in the fall, Macklem notes that "tariffs are weakening the Canadian economy "as evidenced by weakness in sectors directly-impacted by trade. And "Employment growth in the rest of the economy has now slowed. "

• "The reality is tariffs are increasing trade friction with our biggest trading partner - that has efficiency costs. Monetary policy can't undo that... what we can do is help the economy adjust while maintaining, while maintaining well controlled inflation. That's what we're focused on... it's going to be about balancing those risks. If the risks tilt, if the risks shift, we're prepared to take action, and if the risks tilt further, we're prepared to take more action, but we're going to take it one meeting at a time. We are taking a shorter horizon. We're being a little less forward looking than usual, and we'll make that risk assessment in October when we get there."