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The Bank of Canada has shifted its messaging in recent months from the need to get inflation under control to bringing it back down to the 2% target. But recent turbulence is in the global banking sector is forcing the central bank to pivot and reassure Canadians that it’s ready to contend with any financial instability.

Bank of Canada governor Tiff Macklem delivered a speech at the Toronto Region Board of Trade Thursday and said the central bank is ready to step in if stress in the global banking system affects Canada. But he emphasized it won’t back off from its inflation fight as it works to bring inflation down to its 2% target.

Stress in the global banking sector was set off by the collapse of Silicon Valley Bank in the United States in March as the medium-sized lender saw its depositors withdraw money at the same time. The bank runs, partly set off by monetary policy tightening, have pushed central banks to contend with a new risk to the economic outlook coming from the financial sector.

Macklem said here in Canada, the spillover effects have been “muted,” thanks to tighter regulations and sound risk management on the part of Canadian banks.

But he conceded that risks still exist and that financial instability raises the odds of a sharper economic downturn.

But with the central bank still laser-focused on meeting its 2% inflation target, Macklem says the Bank of Canada won’t sacrifice price stability for financial instability.

Instead, it wants — and needs — to achieve both.

“The uncertainty that comes with high inflation, or a lack of price stability, is not going to improve financial stability,” he said. “And severe financial stress will only make achieving price stability more complicated.”

The governor says the central bank has separate tools to address both mandates and that the Bank of Canada will take into consideration the interacting effects of financial stress and inflation.

Financial instability often leads to tighter borrowing conditions, making it harder for people and businesses to get loans while also making borrowing more expensive.

If that dynamic were to play out in Canada, Macklem said the Bank of Canada would have to take that into consideration when setting its key interest rates, given it could lead to tighter financial conditions than the central bank had intended.

“If that was to persist, that is something we would need to take into account,” Macklem later said in a news conference. “Otherwise we would risk overtightening.”

Along with reassurance that the central bank is able to address any financial stress that could filter into Canada, Macklem’s message still focused on the concern that inflation could be stickier than expected.

Though inflation has fallen significantly from its peak of 8.1% last summer, Macklem stressed that the Bank of Canada’s job is not done just yet and there is work to do before it can move below 3%.

The central bank is looking to see further easing in the Canadian labour market, along with a decline in inflation expectations and a return to normal price setting by businesses.

The Bank of Canada paused its aggressive rate hiking cycle earlier this year to monitor the effects of its previous rate hikes on price growth. So far, inflation has been falling fast enough to keep the Bank of Canada on the sidelines, but the central bank is keeping the door open to more rate hikes if needed.

“If we start to see signs that inflation is likely to get stuck materially above our 2% target, we are prepared to raise rates further,” he said.

The Bank of Canada’s key interest rate is sitting at 4.5%, the highest it’s been since 2007.