The National Post reports in its Thursday edition that while the Bank of Canada anticipates sustained, elevated levels of inflation, the current rally, if it persists, could make it difficult for policymakers to bring inflation back to its target of 2 per cent over the long term. The Post's Jesse Snyder and Bianca Bharti write that
Canada's inflation rate first grew beyond the BOC's comfort zone of between 1 and 3 per cent in April, and has stayed there ever since. Supply-chain constraints are increasingly responsible for higher prices, rather than year-over-year comparisons with the worst months of the recession, when deflation presented a far bigger risk.
Still, interest rates are unlikely to rise any time soon. Governor Tiff Macklem has said repeatedly he wants to see a "complete" economic recovery before he hikes interest rates, dependent on a recovery in labour market participation. Canadian employers will need to add an additional 156,000 positions to reach that.
The BOC has been bracing for inflation of about 4 per cent. The July Monetary Policy Report predicted the CPI would average annual increases of 3.9 per cent over the third quarter, which ends in September. The CPI rose 3.7 per cent in July.
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