BoC Kozicki speaks on recent swings in inflation

BoC Deputy Governor Sharon Kozicki acknowledged in a speech that CPI inflation has seen “ups and downs of the size we’ve seen in the past couple of months,” highlighting a decrease from a high of 8.1% in June 2022 to 2.8% in June this year. However, this decrease was followed by a surge to 3.3% in July and 4.0% in August (as released yesterday). Despite this decrease and subsequent rise, she affirmed that such fluctuations are “not that unusual.”

She emphasized the Bank’s approach to monitoring inflation, which includes a focus on measures of core inflation that exclude more volatile price movement components to get a true sense of underlying inflation.

“Measures of core inflation have eased,” she noted, yet underlined that “inflationary pressures are still broad-based.” She continued to express concern over the number of CPI components with price increases exceeding 5%, which, despite being lower than before, remains “much higher than it usually is when inflation is stable and close to 2%.”

Acknowledging that “underlying inflation is still well above the level that would be consistent with achieving our target of 2% CPI inflation,” Kozicki emphasized the Bank’s commitment to continuous evaluation of several factors such as “the evolution of excess demand, inflation expectations, wage growth and corporate price-setting behaviour” to ensure alignment with the 2% inflation target.

To maintain economic stability amidst the dynamic inflationary environment, Kozicki emphasized that the Bank is “prepared to raise the policy interest rate further if needed.”

Full speech of BoC Kozicki here.