Bank of Canada ‘more optimistic’ about rate strategy and inflation trends

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“With the economy no longer in excess demand, members agreed they would be watching for signs that the slowdown in the economy was translating into further and sustained easing in inflation,” the BoC said.

The central bank is also considering the long-term impact of wage growth, which continues to hover in the 4%-5% range.

“If this were to continue, it would not be consistent with achieving price stability, particularly given weak productivity,” the BoC said.

“No new survey information had been released on either corporate pricing behaviour or the near-term inflation expectations of consumers and businesses. Members said they wanted to see more evidence that these indicators were trending in a direction that is consistent with price stability.”

Various risks to inflation outlook remain

Despite these positive signs, the BoC stated that it remains vigilant of possible risks to the inflation outlook, and is not ruling out further upward adjustments to the benchmark interest rate.

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