Inflation over next few months likely to be higher than projected


Inflation over the next few months is likely to be higher than projected in April’s Monetary Policy Report, mostly due to strong commodities and base-year effect, Bank of Canada (BoC) Deputy Governor Timothy Lane said on Thursday, per Reuters.

Additional takeaways

“There is a good chance that productivity growth will be stronger than expected, giving the economy more room to grow before inflation becomes a worry.”

“Inflation expected to fade later in the year as economic slack exerts downward pressure.”

“Risks to inflation outlook identified in April remain relevant; these include stronger C$ hitting exports, the potential for more persistent cost pressures to push up inflation.”

“Given unusually high uncertainty around potential and future growth we need to rely on a wider range of data than usual to assess how much slack exists in the economy.”

“That assessment is key to deciding when to start scaling back monetary policy stimulus.”

“Recent economic data show signs of increasing resilience that bode well for the underlying recovery.”

“Economic setback from the third wave of COVID-19 should be temporary; bank still expects Q2 annualized growth to be close to the 3.5% predicted in April.”

“Signs of moderation in the housing market have appeared in recent weeks but the level of activity remains very high.”

Market reaction

The USD/CAD pair showed no immediate reaction to these comments and was last seen losing 0.2% on the day at 1.2087.



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