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MNI BRIEF: Highlights From BOC Governor Macklem's Speech

"Governing Council recognizes that it will take time for past interest rate increases to have their full effect on the economy and inflation. That’s why we’ll be carefully assessing the effects of our actions as we seek to slow spending and return inflation to the 2% target," Governor Tiff Macklem said Thursday.

"Labour markets remain tight, the economy is in excess demand, and we have yet to see clear evidence that underlying inflation has come down. When combined with still-elevated near-term inflation expectations, the clear implication is that further interest rate increases are warranted. Simply put, there is more to be done. We will need additional information before we consider moving to a more finely balanced decision-by-decision approach." 

"We know we are still a long way from the 2% target. We know it will take some time to get there. We also know there could be setbacks along the way, and we can’t afford to let high inflation become entrenched."

"We can’t count on easing pressure on global prices to lower inflation in Canada. At a minimum, improving global factors will take time to filter through to Canadian inflation. And the recent depreciation of the Canadian dollar in the face of US-dollar strength will offset some of this global improvement by making US goods and vacations more expensive for Canadians."

"Of our three (core inflati) measures, CPI-common is becoming more difficult to use in real time because it has been subject to large historical revisions. With price movements becoming much more generalized in the last year, what is included in the common component has changed considerably. CPI-trim and CPI-median, in contrast, are more robust to changes in the behaviour of prices. These measures appear to have performed well and have been subject to much smaller revisions. With this in mind, we are more focused on these two measures and we are reassessing CPI-common."

"The longer high inflation persists and the more pervasive it becomes, the greater the risk that high inflation becomes entrenched." 

"Increased uncertainty heightens the risk that inflation expectations could become de-anchored." 

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