Macklem Q&A: Highlights three reasons inflation will be temporary

Author: Adam Button | Category: Central Banks

Macklem answers questions from the media on July 14, 2021

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
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