Hitting the bull’s-eye on the two per cent inflation target in August was “good news” for the Bank of Canada, but it doesn’t mean the central bank’s efforts are done, according to a senior official.
Annual inflation cooled sharply to two per cent last month, Statistics Canada reported Tuesday, hitting the Bank of Canada’s target after months of raising interest rates to tame rampant price pressures. Since June, the central bank has cut its benchmark interest rate three times, softening pressures on the economy amid signs prices are coming back under control.
Carolyn Rogers, senior deputy governor at the central bank, spoke at a Bloomberg event on Tuesday, where she was asked whether two per cent inflation meant it was “mission accomplished” for the Bank of Canada after the most rapid tightening cycle in its history.
“It was good news. It was good news for the bank, more importantly it was good news for Canadians. It’s been a long journey, it’s been a tough journey,” Rogers said.
“We’re glad to see two per cent, but no, there’s still work to do.”
The Bank of Canada needs to see that the return to two per cent inflation is “sustainable,” and not a one-time event, Rogers explained.
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The central bank is still looking for trends in its preferred measures of core inflation to show that price pressures will hold at two per cent for the long term, she said.
Rogers noted that the Bank of Canada is expecting some “bumpiness” in the headline inflation figure in the months ahead, but suggested that, depending on the factors, that might be something the central bank is willing to look through.
There’s also the matter of the so-called “soft landing,” which will answer whether the Bank of Canada was able to effectively restore price stability without tipping the economy into a recession.
So far, Canada has avoided that fate, but unemployment has been rising and some economists expect that third-quarter economic results will undershoot the central bank’s latest estimates.
“We’ve got to stick the landing,” Rogers said.
The Bank of Canada will get another set of inflation data, as well as updates on the labour force and economic activity, before its next decision set for Oct. 23.
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