Cutting interest rates was easy. But the Bank of Canada still has a

Bank of Canada governor Tiff Macklem says the central bank has to rebuild trust with Canadian households. After the last two years of interest rate hikes and messaging missteps, that’s not going to be an easy job.

The central bank cut rates this week for the first time since March 2022, when it embarked on one of the fastest and most aggressive hiking cycles in Canadian history, raising its key overnight lending rate 10 times in an attempt to get inflation back under control. 

That meant Canadian households were hit by a double whammy of sorts. They were clobbered by rising prices and squeezed by increased borrowing costs.

That was exacerbated by the fact that none other than the central bank governor himself initially told Canadians that interest rates would remain low.

“If you’ve got a mortgage or if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” Macklem said in July 2020.

Within a matter of months, inflation began to surge, which put immediate pressure on the Bank of Canada to start raising rates.

In a National Post editorial in 2021, Macklem wrote that the inflationary pressures Canadians were struggling with were due to temporary factors mostly caused by the pandemic.

“All these factors have driven prices up, but none of them are likely to last. So, we shouldn’t overreact to these temporary price increases,” he wrote.

Even as inflation slowly started working its way back to target, the bank was reluctant to move too fast and bring down interest rates too early.

Macklem says he worries about central bank’s credibility

In an interview with CBC News, Macklem was asked if he worries about the central bank’s credibility and public trust.

“I do,” he said, noting the last few years have been “a very difficult period for Canadians.” 

He says inflation makes people angry and erodes their confidence in the economy.

“That’s one of the reasons why it’s so important to get inflation back down,” said Macklem. “We’ve taken a bit of a hit, and we’re going to have to rebuild that trust.”

Jim Thorne, the chief market strategist from Altus Wellington Private Wealth, says that won’t be easy.

Thorne says the bank had a tough job and had its hands tied by various levels of government that kept spending even as the central bank was trying to rein in inflation.

But he says the Bank of Canada…