Bank of Canada trying to determine why inflation has been on decline
MONTREAL - A senior official says the Bank of Canada is still trying to figure out exactly why inflation has been on the decline since 2012 and fallen below its ideal target of two per cent.
In what he calls his last speech as the central bank's senior deputy governor, Tiff Macklem says the economic puzzle appears to reflect a combination of bad and good disinflation.
He says bad disinflation stems from persistent excess supply in the economy, while good disinflation results from more competition in the retail sector.
Macklem says in theory, monetary policy should work to counter bad disinflation stemming from weak demand.
But in practice, he says it's more like an exercise in risk management, as there's still considerable uncertainty surrounding the bank's measurements and projections.
Macklem says while the fundamental drivers of growth and future inflation appear to be strengthening, inflation is expected to remain well below target for some time, which means the downside risks have grown in importance.
"We need to do our best to determine why inflation is below target, but no matter how hard we try, there will be uncertainty about our diagnosis," Macklem said in remarks prepared for delivery at Concordia University.
"Our work at the Bank of Canada is both to sharpen the analysis as much as we can and, at the same time, to take account of the risks and uncertainties as we determine the appropriate course for monetary policy to achieve our inflation target."
Some uncertainty about the bank's judgments include how long increased competition will depress inflation, he said. Increased retail competition will continue to drive prices lower for about another year.
While there are no signs of a rebalancing towards exports and business investment in Canada, the strengthening of the global economy and the recent depreciation of the loonie should foster a broadening of the composition of growth in Canada, Macklem said.
Read more Business News
- All candidates forum comingKelowna - 8:57 pm
- Truck thief quickly nabbedPenticton / S. Okanagan - 7:11 pm
- Bobbitt hearing adjournedPenticton / S. Okanagan - 7:08 pm
- Development builds protestKelowna - 4:52 pm
|QHR Technologies Inc||1.17||+0.05|
|Anavex Life Sciences||0.192||+0.001|
|Copper Mountain Mining||2.17||+0.18|
|Sunrise Resources Ltd||0.06||0.00|
|Mission Ready Services||0.46||+0.01|
This time of year, I always worry about which friends of mine will get caught going off the road in adverse weather conditions. With a little preparation most accidents can be avoided. Having won the...
Photo: Thinkstock.comThe end of record-low rates is nigh, according to one major bank, which has taken a stance and predicted when the Bank of Canada will raise its long-standing overnight rate. &ldq...
The third week in October is “Small Business Week”, a week dedicated to supporting local, small businesses. The week was designed to bring awareness to Canadians about the role small busin...