Macklem Q&A: Highlights three reasons inflation will be temporary
Macklem answers questions from the media on July 14, 2021
- Three reasons for temporary inflation: 1) breakdown of individual items driving inflation shows temporary issues 2) slack in economy 3) survey evidence of firms on pricing
- Cites supplychain bottlenecks as a new factor that will prolong temporary inflation
- Notes that long-term inflation expectations have not moved higher
- Of course there is some uncertainty about inflation and we will be watching the evolution very carefully
- We've seen some moderation in housing and we expect more gradual moderation
- "Now that people can go to a restaurant, will they still want a bigger kitchen? We'll see"
- If Canadian dollar were to move higher than forecast it would put competitive pressure on exports
- If wage growth runs well ahead of productivity that would be a concern but we're not seeing it yet
- Will hold rates at lower bound until output gap closes (forecast is H2 2022)
- Our outlook is 'not really that different' from April
- After QE net buys end, we will enter phase where balance sheet kept flat in 'reinvestment phase'
- Measures of long-term unemployment are 'very high'
- We think effect of jobs market scaring will be less than anticipated six months ago
- We don't just look at level of Canadian dollar, we look at why it's higher
The next BOC decision is Sept 9