Bank of Canada assesses fiscal spending's inflationary pressure still limited

Bank of Canada Governor Tiff Macklem told the House of Commons finance committee on Wednesday that current federal fiscal plans do not meet either of the two conditions the central bank uses to judge whether government spending is interfering with its 2% inflation target—namely, fiscal unsustainability that disrupts financial markets, or fiscal and monetary policy pulling in opposite directions. Macklem said he is keeping the door open to further rate hikes but will decide cautiously given prevailing uncertainty. The remarks matter because they signal that Ottawa's spending plans are not, for now, forcing the Bank of Canada to offset fiscal stimulus with tighter monetary policy. Investors should watch upcoming federal budget and fiscal updates alongside inflation data for signs that either condition could be triggered.