Bank of Canada Governor Tiff Macklem raised alarms about growing global economic imbalances during a speech in Paris on Tuesday, warning that persistent trade and capital flow disparities could undermine long-term financial stability. Speaking at the OECD headquarters, Macklem called for renewed international cooperation to address the risks, which he said are exacerbated by geopolitical tensions and shifting supply chains.
Macklem highlights risks of unbalanced growth
Macklem noted that while some economies are running large current account surpluses, others are accumulating unsustainable debts. 'These imbalances are not just a theoretical concern,' he said. 'They can amplify shocks and create vulnerabilities that cross borders.' He pointed to the U.S. trade deficit and China's surplus as examples, though he did not single out any country by name.
The governor emphasized that central banks alone cannot fix the problem. 'Monetary policy has its limits,' he said. 'We need fiscal and structural policies that encourage balanced growth, including in the areas of trade, investment, and savings.' He also warned that protectionist measures could worsen imbalances.
Canada's economy in context
Macklem's remarks come as Canada faces its own economic challenges, including high household debt and a housing market that remains stretched. The Bank of Canada has held its key interest rate at 4.75% since April, after a series of hikes aimed at curbing inflation. Inflation has eased to 2.7%, but core measures remain sticky.
According to Statistics Canada, the country's current account deficit widened to $12.4 billion in the first quarter of 2026, driven by higher imports of machinery and consumer goods. Macklem said that while Canada's external position is manageable, it is not immune to global trends.
Global cooperation essential
The governor urged the G20 and international financial institutions to step up efforts to monitor and address imbalances. 'We have the tools and the forums to act,' he said. 'What is needed is political will.' He also called for stronger financial regulation to prevent capital flow volatility from destabilizing emerging markets.
Macklem's speech was part of a broader push by central bankers to focus on long-term risks, including climate change and digital currencies. He noted that the Bank of Canada is exploring a central bank digital currency but said no decision has been made on issuance.
