Macklem says fiscal policy is not undermining inflation control

Bank of Canada Governor Tiff Macklem told MPs that federal fiscal policy was not currently working against the central bank’s efforts to control inflation, while defending the Bank’s recent interest-rate increase and leaving open the possibility of further hikes. Macklem appeared Tuesday before the House of Commons finance committee, two days before the federal government was scheduled to present its 2026 budget. Asked by Conservative finance critic Michael Chong about the government’s affordability measures, Macklem declined to assess them directly. He said he comments on fiscal policy when spending is approaching unsustainable levels or when government actions are working against the Bank’s inflation-control efforts, and said he did not consider either condition to apply at the time. The Bank raised its policy rate by 25 basis points last week, to 2.5 per cent. Macklem said it was the first increase since July 2023 and was intended to reduce the risk that elevated energy costs would spread into prices more broadly. He maintained that rationale during the committee appearance. Macklem said gasoline, diesel and heating-oil prices were high and expected to remain so, increasing...