Friday, July 3rd23.6°C
25016
22748

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.

The Canadian Press


Read more Business News

25354


Recent Trending




Today's Market
S&P TSX14659.38+21.39
S&P CDNX670.10-1.48
DJIA17730.11-27.80
Nasdaq5009.21-3.91
S&P 5002076.78-0.64
CDN Dollar0.7947-0.0025
Gold1167.00+4.00
Oil56.97-0.64
Lumber288.50+0.40
Natural Gas2.792-0.030

 
Okanagan Companies
Pacific Safety0.165+0.005
Knighthawk0.010.00
QHR Technologies Inc1.56+0.01
Cantex0.035-0.015
Anavex Life Sciences0.455+0.004
Metalex Ventures0.075+0.010
Russel Metals22.80-0.07
Copper Mountain Mining1.15+0.01
Colorado Resources0.065+0.000
ReliaBrand Inc0.006+0.000
Sunrise Resources Ltd0.04+0.01
Mission Ready Services0.16-0.03
Decisive Dividend Corporation2.50+0.42

 





FEATURED Property
2254666928 Arbor View Drive
6 bedrooms 4 baths
$619,000
more details
image2image2image2
Click here to feature your property
Please wait... loading


Active listening

Has this ever happened to you? You had an initial meeting with a prospect. You asked that prospect what seemed to be all the right questions. You had what felt to you like a good conversation, and bas...


The price of money

Money is not a commodity. By definition, a commodity is a generic product that is bought and sold on price alone. Money, Canadian bills for example, look the same, smell somewhat the same, and are ava...


TFSA strategies

Photo: Thinkstock.comThe federal government has increased the annual contribution limit of Tax-Free Savings Accounts (TFSA) to $10,000. Going forward, the annual limit will no longer be indexed to inf...

_



26376

26370


Member of BC Press Council


25831