CIBC CEO says Canada should pursue policies that tame inflation in upcoming budget

By Nivedita Balu

TORONTO (Reuters) - Canadian Imperial Bank of commerce CEO Victor Dodig said on Thursday the Canadian government risks reigniting inflation with spending measures aimed at fixing an acute housing crisis.

Prime Minister Justin Trudeau has announced measures, including a C$6 billion Canada Housing Infrastructure Fund to accelerate the construction and upgrading of housing, to deal with housing shortages that have dented his Liberal government's popularity.

More housing-related announcements are expected in the federal budget on April 16.

"I worry that some of the solutions that are being talked about and have been introduced in advance of the budget are a medium to longer term in nature," Dodig told Reuters on the sidelines of the lender's annual meeting, adding that the government has to be "very mindful" of its impact on inflation.

He said Ottawa should focus on reducing inflation at a time consumers are already slashing spending on food and other basic expenses. Without lower inflation, the Bank of Canada will have difficulty reducing interest rates.

The central bank, which targets 2% inflation, has sounded similar warnings. Traders expect the first interest rate cut in June as the central bank has maintained rates at a 22-year high of 5% since last year.

CIBC, which has largely tackled challenges from its high exposure to mortgages, would benefit from a rebounding Canadian economy. The bank built allowances in 2023 to protect against souring loans and lowered the number of negatively amortising loans.

Dodig said CIBC would continue to focus on the U.S. market, finding growth opportunities in commercial and private banking.

"(We are) not trying to be a Wall Street bank... but we are trying to address that part of the economy that we call private economy," he said.

(Reporting by Nivedita Balu in Toronto; Editing by Cynthia Osterman)