BoC Deputy Governor Toni Gravelle, in a speech yesterday, stressed the need for flexibility in response to the uncertain economic environment. He pointed out that, within the past month, headline inflation has dropped, and global markets have seen reduced risk appetite, partially due to the increased stress in global banking systems.
Gravelle noted that, despite these challenges, Canada’s labor market remains tight, which is pushing many services prices upward. He said, “We continue to expect consumer price index (CPI) inflation to come down in the months ahead, but we will need to see further slowing in core inflation to get CPI inflation back to the 2% target.”
As the BoC prepares for the April Monetary Policy Report, Gravelle explained that the central bank is closely monitoring global banking stresses, and will assess the macroeconomic impacts of this evolving situation. He emphasized that the bank will be “looking specifically at potential spillovers into the real economy to the extent that financial conditions tighten and there are broader confidence effects.”
