The factors influencing Canada‘s red-hot inflation are proving more persistent than expected, but there are “good reasons to believe” they remain temporary, Bank of CanadaGovernor Tiff Macklem said on Thursday.
Macklem, answering questions after a speech to a foreign policy think-tank, said Canada‘s central bank continues to expect inflation to remain above its 1-3% control range in 2021, primarily due to base-year effects and supply chain disruptions.
“There’s a bit more persistence than we previously thought. But when you look at it, I think there are good reasons to believe that they are temporary,” he said, when speaking about the factors driving inflation.
Canada‘s annual inflation rate accelerated to 4.1% in August, an 18-year-high. That has led to public outcry over rising prices and prompted worries that those hikes could become persistent.
“Our job as a central bank is to make sure that one-off increase in prices doesn’t become ongoing inflation… What we’re really looking for is to see any signs of spreading,” Macklem told reporters.
He said while short-term measures of expected inflation had moved up, medium- to longer-term measures of expected inflation had not.
Macklem also said the central bank was watching wage growth carefully. It is not seeing evidence of wages becoming an independent source of inflation, he added.
“I do want to assure Canadians that they can be confident that we will control inflation,” he said.
It is taking longer than expected to work through “frictions” in the labor market, as companies need time to find the right workers, and workers have to find the right jobs.
“We’ve never reopened an economy before. And I think what we’re seeing is reopening an economy is a lot more complicated than closing one,” he said.
Economists said the remarks were consistent with guidance that the Bank of Canada will keep rates on hold until the second half of 2022.
On the central bank’s monetary policy framework, Macklem said Canada needs something “that is robust to a broad range of circumstances.”
The bank is reviewing its inflation-targeting framework, in place since 1991. The current agreement with Ottawa expires at the end of this year.
The U.S. Federal Reserve switched to a loose form of average inflation targeting last year.
(Additional reporting by Steve Scherer and David Ljunggren in OttawaEditing by Frances Kerry, Paul Simao and Andrea Ricci)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
