"You're seeing a little bit of spillover to Canada, but honestly, it's really been quite muted," Macklem said when asked about how the country's financial system had been affected. "And I do think we do need to be vigilant." Macklem spoke at the International Monetary Fund in Washington where he is attending an annual meeting.
Macklem said the bank routinely discusses risk management
with banks, and that it was prepared to step in to provide
liquidity if the domestic banking system were to come under
severe strain, echoing comments made by Deputy Governor Toni
Gravelle last month.
The failures of U.S. lenders Silicon Valley Bank and
Signature Bank, followed by Credit Suisse's rescue, are
prompting central bankers to closely monitor the potential for
banking stress to trigger a credit crunch.
On Wednesday the Bank of Canada (BoC) held its key overnight
rate steady at 4.50%. After raising rates eight straight times
through January, the BoC has held rates at its latest two policy
meetings. It was the first major central bank in the world to
pause its tightening campaign.
The bank on Wednesday pushed back against market
expectations for a rate cut this year and indicated that the
risk of a recession had diminished.
"Our economy remains in excess demand and labor markets are
still tight. Unemployment is still very close to a record low,"
Macklem said on Thursday. "We can see past interest rate
increases working their way through the economy, shrinking
demand."
(Reporting by Steve Scherer in Ottawa, editing by Ismail Shakil
and Emelia Sithole-Matarise)
