CANADA: BoC Symmetric To Deviations Away From Inflation Band

Paraphrased responses from the BoC's press conference on the balance of risks around inflation and the potential response to deviations from target: 

• Q: Does the BoC still see the risk to the inflation outlook as balanced? Upward pressures are looking less evident than downward one.

• Macklem: Go back to our July forecast, inflation has come in broadly in line. That forecast was viewed to be broadly balanced. Since then, core inflation came down broadly in line with that forecast. Shelter inflation is still much too high but does look like it’s starting to roll over/come down. That needs to continue. On the growth side, our July forecast has growth strengthening in 2H24. Q2 GDP growth came in stronger than expected but the monthly dynamic softened into the summer, offering some downside risk in the near-term. We’ll have a new forecast in about six or seven weeks.

   

• From MNI's Greg Quinn: You noted the risk that inflation could fall too much. Can small deviations below 2% be overlooked a bit or would you need to fight hard against it?
• Macklem: Whether above or below we’re focused on getting inflation back to target. We have a 1-3% band which gives an idea of a normal level of variation with shocks. From 1995 to Covid it was within that band about 80% of the time. We’re always aiming to get it close to the middle. If we’re a little over or a little under we’re going to be trying to get it back close to 2% - we’re symmetric in that respect.