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Bank of Canada governor Tiff Macklem says the financial system has to adjust to higher interest rates, just like the rest of the economy.

Macklem addressed the recent banking stress that was set off in the U.S. last month while speaking to reporters today from the sidelines of the International Monetary Fund meetings in Washington, D.C.

The collapse of Silicon Valley Bank, followed by other financial institutions, has raised concerns about the implications of rapid interest rate hiking on financial stability.

Macklem says the financial system will have to adjust to higher interest rates, noting central banks are “resolved in getting inflation back to their inflation targets.”

The governor says adjusting to higher interest rates can be hard for the financial system, just as it can be difficult for Canadians and businesses.

Macklem says he disagrees with the idea that price stability and financial stability are at odds with each other and says achieving both is critical.