Bank of Canada Governor Tiff Macklem in his prepared text for a speech says monetary policy needs more time to ease remaining price pressures. He adds:
- Monetary policy is working; it has slowed demand, rebalanced the economy, and brought down inflation
- Shelter price inflation is now the biggest contributor to above-target inflation
- Years of supply shortages and the recent increase in newcomers have meant house prices have declined only modestly with higher rates
- Housing affordability is a significant problem in Canada — but not one that can be fixed by raising or lowering interest rates
- Canada's structural shortage of housing is not something monetary policy can fix
- More time is needed to bring down inflation
- Volatility in global oil and transportation costs related to wars in Europe and the Middle East could add volatility to Canadian inflation
- The path back to 2% inflation is likely to be slow and risks remain
- Policy interest rate at 5% is the level we think is needed to take the remaining steam out of inflation
- Discussion about future policy is shifting from whether monetary policy is restrictive enough to how long to maintain the current stance
- We want to see inflationary pressures continue to ease and clear downward momentum in underlying inflation
Comments are consistent with previous views and is the blue print for a lot of central bankers. "We need more time...."
