Bank of Canada's Beaudry: Likely that BOC may need to raise policy rate to 3% or higher

Bank of Canada's Paul Beaudry is speaking a day after the Bank of Canada raise rates by 50 basis points to 1.5% from 1.0%

• increasing likelihood that it may need to raise policy rates to 3% or higher
• risk is now greater that inflation expectations could be de-anchored and the high inflation could become entrenched
• in deliberations ahead of June 1 high, bank noted price pressures are broadening and inflation likely to go higher still before easing
• bank must be – and will be – resolute in bringing inflation back down; we will prevent high inflation from becoming entrenched
• we expect strong growth and low unemployment to continue; our interest rate increases will take time to have their full impact Canadian economy is moving further into excess demand; economic rebound has been much faster than the bank anticipated
• the more significant of the two forces driving Canadian inflation is largely international and is more complicated for monetary policy to tackle
• normally, inflationary shocks links to external supply disruptions don't persist for long, so BOC typically did not react to such shocks
• Bank opted against raising rates in 2021 because of what it saw as a temporary inflationary shocks from abroad and because economy was operating well below capacity for most of the year
• Bank also chose not to raise rates in 2021 because premature tightening could have made it harder for people who lost jobs during pandemic to find work
• The risk of leaving rates low was that higher inflation could start to become entrenched; the risk seemed appropriate at the time given slack in economy
• in July, bank will provide an initial analysis of its inflation forecast errors

The USDCAD has moved to a new low for the week and trades at the lowest level since April 22. The pair is in a swing area between 1.2587 and 1.2626. Move below and the sellers add to their bias strength.

\Inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term