BoC Deputy Governor Lawrence Schembri said yesterday, “Our assessment of labour market conditions and underlying capacity and inflationary pressures is now more difficult. Consequently, more uncertainty exists around the timing of when the output gap will close and inflation will return sustainably to our 2-per-cent target.”
“We’ll keep the policy rate at the effective lower bound [0.25%] until excess capacity is absorbed … that excess capacity includes all the groups of employees that aren’t fully employed at this juncture,” Schembri said in response to a question after the speech.
“Now of course, one has to take into account that there’s going to be some natural friction in the labour market, people are going to move between jobs, so we’re not saying that there has to be zero unemployment,” he added.
