Bank of Canada Governor Tiff Macklem has sought to reassure Canadians amid concerns over the declining Canadian dollar, which recently dropped to 72 cents U.S. Speaking before the Senate banking committee, Blacklock's Reporter said Macklem downplayed worries over the impact of a weaker dollar on inflation and cross-border trade.“We believe in flexible exchange rates in this country,” Macklem told the committee, emphasizing Canada’s “very deep foreign exchange market.”The dollar’s value has fallen from a high of 83 cents U.S. in 2021. Sen. Tony Loffreda, a former vice chair of the Royal Bank, questioned Macklem on the potential inflationary pressures of a weak dollar, especially given Canada’s heavy reliance on U.S. imports.“Are you not concerned that will lead to inflation, a weak Canadian dollar?” Loffreda asked, adding, “Three quarters of our exports are to the United States.”“Our economy is not as strong as the U.S. economy,” Macklem replied, explaining that Canada requires lower interest rates than those in the U.S. He added, “We have limits,” though he did not clarify what those limits entailed.Other senators pressed Macklem on what exchange rate might trigger concern from the bank. “Is there a value of the loonie that troubles you?” asked Sen. Pamela Wallin, chair of the committee.“We don’t have an exchange rate target,” Macklem replied.Senators also voiced concerns about the potential for “country pricing,” a practice in which cross-border retailers set higher prices in Canada than in the U.S. due to exchange rate differences. Previous Senate investigations, including a 2013 report on the Canada-U.S. price gap, found Canadians paid up to a 29% markup on identical goods, even when the dollar was close to parity.With Canada’s dollar ranging from a high of $1.10 U.S. in 2007 to as low as 62 cents in 2002, the potential impacts of a weaker currency remain a significant concern for consumers and policymakers alike.
