BOC Lane: Productivity growth will be stronger than expected
Comments from BOC Deputy Gov. Lane
- Productivity growth will be stronger than expected.
- Increased productivity growth gives economy more room to grow before inflation becomes a worry
- Accelerated digital transformation has supported resilience so much that damage to economic potential will be less than feared.
- Inflation over the next few months likely to be higher than projected in April MPR, mostly due to base year effect, strong commodities
- Inflation expected to fade later in the year as economic slack exerts downward pressure.
- Risks to inflation outlook identified in April remain relevant: those include stronger C$ hitting exports, potential for more persistent cost pressures to push up inflation
- Given unusually high uncertainty around potential and future growth, we need to rely on wider range of data than usual to assess how much slack exists in the economy
- That assessment is key to deciding when to start scaling back monetary policy stimulus
- Recent economic data show signs of increasing resilience that bodes well for underlying recovery
- Economic setback from the third wave of Covid 19 should be temporary
- BOC still expectsQ2 annualized growth to be close to the 3.5% predicted in April
- Signs of moderation in housing market have appeared in recent weeks, but level of activity remains a very high
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