Bank of Canada says overheated economy still causing price pressure – Macklem

OTTAWA (Reuters) -Bank of Canada Governor Tiff Macklem, speaking for the first time since the report on Januarys job blowout came out last week, said on Thursday that the economy remains overheated and continued to leave the door open to higher interest rates.

“The Canadian economy remains overheated and clearly in excess demand, and this continues to put upward pressure on many domestic prices,” Macklem said during testimony to the House of Commons finance committee.

“The tightness in the labour market needs to ease, wage growth needs to moderate, and service price inflation needs to cool” or else more interest rate hikes will be needed, he added.

On Jan. 25, the Bank of Canada hiked its key interest rate to 4.5%, the highest level in 15 years, and became the first major central bank to say it would likely hold off on further increases for now.

Macklem reiterated the banks policy stance in opening remarks to the committee.

Canada added a massive 150,000 jobs in January, ten times expectations, data showed on last week.

(Reporting by Steve Scherer and Kanishka Singh)