(June 22) – The minutes from the Bank of Canada board meeting held on May 4 reveal that the bank remains vigilant on inflation.
In the minutes it’s reported that Governor Gordon Thiessen believes the “outlook for global economic expansion remains positive”. U.S. economic growth remains the big driver behind the Canadian expansion. He notes that the U.S. economy may be reaching its limit however, saying, “demand appears to be pressing against capacity … inflationary pressures have recently emerged in the United States.” This contrasts somewhat with the view that inflation hasn’t emerged in the U.S., but the Fed has launched pre-emptive strikes against it.
He observes that Canadian inflation isn’t evident yet, although energy shock effects are threatening to spark it. “Core inflation has remained well below 2% in recent months, partly because of the earlier appreciation of the Canadian dollar, which has restrained price increases and competitive pressures in the retail sector. In contrast, much higher energy prices have kept the year-over-year rise in the total CPI well above the midpoint of the inflation-control target range.”
Thiessen remains on guard against inflation in Canada, noting that he’s still waiting for it to emerge. “Core inflation should edge up, over the next few months as incipient demand pressures on capacity more than offset the restraining effect of the earlier appreciation of the Canadian dollar.”
These extracts were reviewed at the meeting of Bank’s June 15 meeting, minutes of that meeting will be released Aug. 10. The board’s next meeting is scheduled for Sept. 15.
-IE Staff