In a speech, BoC Governor Tiff Macklem said current inflation, close to 5%, is “too high”. But that is “not the result of generalized excess demand in the Canadian economy”. Inflation “largely reflects global supply problems, most of which stem from the pandemic”. As the pandemic recedes, “conditions around the world should normalize, taking pressure off global goods prices.”. BoC expects inflation to “come down relatively quickly” in H2 2022 to 3% by the end of the year.
Macklem added, “to get inflation the rest of the way back to its 2% target, we need a significant shift in monetary policy”. The economy will need “higher interest rates to moderate growth in spending and bring demand in line with supply”, and “keep inflation expectations well anchored”. And, “we signalled with unusual clarity that Canadians should expect a rising path for interest rates.”
