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.”