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Don’t ‘overreact’ to temporary inflation, Bank of Canada governor says

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Bank of Canada Governor Tiff Macklem, writing in a column for the Financial Post newspaper on Thursday, said Canadians can be confident that the cost of living will not rise out of control as the economy reopens from the COVID-19 pandemic.

“The Bank of Canada remains firmly committed to keeping inflation low, stable and predictable,” Macklem wrote. “You can be confident that we will keep the cost of living under control as the economy reopens.”

Read more: What’s causing higher inflation and why it could last years

Canada’s inflation rate slowed more than expected in June to 3.1 per cent, down from a decade-high 3.6 per cent in May, data showed on Wednesday, but some analysts said it might be only a brief reprieve.

It was the third consecutive month that inflation remained above three per cent – the top of the bank’s one-to-three per cent control range. In the newspaper column, a medium rarely used by the Bank of Canada, Macklem said inflation will be back within the target range by next year.

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Macklem reiterated the bank’s position that current inflation pressures are due to temporary factors, such as supply constraints and the comparison to last year’s low price levels – both caused by the pandemic.

“All these factors have driven prices up, but none of them are likely to last. So, we shouldn’t overreact to these temporary price increases,” he wrote.

(Reporting by Steve Scherer Editing by Kevin Liffey and Frances Kerry)

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