The Globe and Mail reports in its Friday, May 21, edition that Governor Tiff Macklem said the Bank of Canada is ready to adjust its monetary policy if inflation comes in persistently above the bank's forecast. The Globe's Mark Rendell writes that Mr. Macklem, however, expects the latest spike in inflation to be temporary.
Statistics Canada reported Wednesday 3.4-per-cent inflation in April, the highest year-over-year jump in the Consumer Price Index in a decade.
The increase was driven largely by rebounding gasoline prices being compared with low prices early in the pandemic. However, there was also a broad-based rise in consumer prices on a month-to-month basis, adding to concerns that higher inflation could become entrenched as the economy reopens. Mr. Macklem said on Thursday at the release of the bank's annual Financial System Review: "There is a risk that this run-up in inflation proves to be more persistent than we've expected. At the same time, I would underline there's also some downside risks on our projection."
The BOC's most recent forecast in April showed inflation hitting 3 per cent in the coming months, before falling toward the 2-per-cent target later in the year.
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