Canadian inflation appears headed in the “right direction” but remains too elevated, a top Bank of Canada official said.
In a speech Tuesday, Deputy Governor Paul Beaudry said the central bank needs to work hard to ensure expectations for inflation don’t become entrenched at higher levels, with “coherent, clear and relatable” public messaging that it remains focused on its 2 per cent target.
His remarks come hours after a Statistics Canada report showed annualized inflation slowing to 7 per cent in August, from 7.6 per cent in July. “While we’re headed in the right direction, that’s still too high,” Beaudry said.
“We will continue to take whatever actions are necessary to restore price stability for households and businesses and to maintain Canadians’ confidence that we can deliver on our mandate,” the deputy governor said.
Two weeks ago, policy makers led by Governor Tiff Macklem raised the benchmark overnight interest rate by 75 basis points to 3.25 per cent, up a full three percentage points from the emergency pandemic low that held until March. They are expected to hike again in October.
Beaudry’s lecture at the University of Waterloo was on lessons learned from the policy response to Covid-19, including the need to consider global spillover effects from domestic policy decisions and the role of inflation expectations.