BOC Macklem is speaking and says:
- 2026 monetary policy framework renewal should leave 2% inflation target unchanged
- “Now is not the time to question the anchor that has proven so effective,” says Macklem
- BOC’s focus will be on how it can improve the framework and its implementation to best address structural changes
- BOC wants to consider the interaction of monetary policy and housing; does persistently high shelter price inflation distort measures of core inflation?
- If U.S. tariffs are long-lasting and broad-based, there will not be a bounce back
- Updated BOC model shows Canadian output would fall almost 3% over two years if U.S. imposed tariffs, all but wiping out growth forecasts for 2025 and 2026
- Renewal will look at whether BOC needs a richer monetary policy playbook and how to measure underlying inflation
- Model shows that exports would fall 8.5% in the year after tariffs took effect
- In this case, we might eventually regain the current rate of growth, but the level of output would be permanently lower
- Initial impact of tariffs would be a one-time rise in prices; monetary policy must ensure higher prices do not become ongoing inflation
This article was written by Greg Michalowski at www.forexlive.com.
