BoC Senior Deputy Governor Carolyn Rogers reiterated in a speech yesterday that tightening is in a “conditional pause”. More evidence is needed to decide whether policy is restrictive enough. Services price inflation will need to cool further.
The decisive to leave policy rate unchanged at 4.50% on Wednesday was a “conditional pause”. “If economic developments unfold as we projected and inflation comes down as quickly as we forecast in the January Monetary Policy Report (MPR), then we shouldn’t need to raise rates further,” she said. “But if evidence accumulates suggesting inflation may not decline in line with our forecast, we’re prepared to do more.”
Economic data since January showed a “mixed picture”. While “things are unfolding broadly in line with our outlook,” she added, ” We’ll need to see more evidence to fully assess whether monetary policy is restrictive enough to return inflation to 2%.”
Rogers also noted that inflation is “coming down largely as expected” with a “clear momentum shift in goods prices”. However, “services price inflation needs to cool further”. Companies need to “return to more normal pricing behavior”.
“Year-over-year and three-month rates of core inflation will both need to come down more than they have for inflation to return sustainably to 2%, as will short-term inflation expectations,” she said.
