Bank of Canada's Gravelle speaking after the Bank of Canada's rate decision yesterday where the central bank kept rates unchanged at 5.0%.
Below are the highlights from his speech where he acknowledged a welcome improvement in October inflation measures but emphasized the need for further progress to achieve price stability.:
- Shelter Price Inflation: Gravelle noted that housing imbalances have serious consequences for shelter price inflation, contributing 1.8 percentage points to the total October inflation rate of 3.1%.
- Housing Supply Response: Emphasized the need for Canada to have more homes and a housing supply that is more responsive to increases in demand.
- Demographic Demand and Supply Issues: Pointed out that a jump in demographic demand, coupled with existing structural supply issues, could explain why rent inflation continues to climb.
- Government Collaboration: Stressed the importance of all levels of government working together on housing policies to boost supply.
- Capacity and Flexibility: Urged the reduction of barriers to adding capacity and ensuring market flexibility to meet future changes in housing demand.
- Housing and Inflation: Warned that without more house building, inflationary pressures in the shelter sector could continue to build.
- Rent Inflation: Highlighted that rent inflation reached a 40-year high in October, with housing supply not keeping pace with recent increases in immigration.
- Housing Activity: Reported that housing activity grew 8.3% in Q3 but remains far below the level needed to meet growing housing needs.
- Immigration's Impact: Commented that recent increases in immigration have boosted near-term consumption but haven't significantly affected inflation.
- Economic Balance: Noted that the economy is now roughly in balance, with a focus on monitoring inflation expectations, wage growth, and corporate pricing behavior.
- Inflation Path: Stressed the importance of indicators in assessing whether inflation is on a sustained path to the 2% target.
