HomeLive CommentsBoC's Macklem: Path to 2% inflation slow and risks remain

BoC’s Macklem: Path to 2% inflation slow and risks remain

In a speech, BoC Governor Tiff Macklem underscored the importance of allowing “more time” for monetary policy to take full effect in mitigating inflationary pressures within the Canadian economy. The path to 2% target is “likely to be slow” and “risks remain.

Macklem acknowledged the successes of recent rate hikes in aligning supply with demand, pointing to a discernible decrease in inflation across both goods and services. Shelter inflation, however, continues to pose a significant challenge. He attributed this trend not only to monetary tightening but also to deeper issues in the “structural shortage of housing” that monetary policy alone cannot resolve.

Further complicating the inflation landscape are the volatile oil and transportation costs linked to international conflicts and disruptions. While these factors are beyond the control of BoC, Macklem emphasized the central bank’s focus on mitigating any broader inflationary impacts these cost increases might “feed through” to inflation in other goods and services.

Macklem’s outlook projects a gradual return to the 2% inflation target, with expectations set for inflation to remain near 3% in the first half of the year, decreasing to about 2.5% by the end of the year, and finally achieving 2% target in 2025.

“Putting this all together, the resulting push and pull on inflation means the path back to 2% inflation is likely to be slow and risks remain,” he noted.

Full speech of BoC Macklem here.

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