The Bank of Canada's Senior Deputy Governor and Governor recently addressed the Standing Senate Committee on Banking, Commerce, and the Economy, discussing the country's economic landscape and monetary policy stance.
In the opening statement, the Governor expressed pleasure in discussing the recent policy announcement and the Monetary Policy Report alongside Senior Deputy Governor Carolyn Rogers. The Governor highlighted three key messages, emphasizing the effectiveness of monetary policy in easing inflation and supporting economic growth. The forecast indicates solid GDP growth for the current year, with a further strengthening expected in 2025.
According to the Governor, recent economic data reflects a stalled growth in Canada in the second half of the previous year, leading to an excess supply situation. However, there is optimism for growth in 2024, primarily driven by strong population growth, increased consumer demand, and government spending. The forecast predicts GDP growth of 1.5% for the current year and around 2% for 2025 and 2026.
Regarding inflation, the report mentions a gradual easing of core inflation, with expectations to reach the 2% target in 2025. Despite a 2.9% CPI inflation rate in March, price increases are decelerating in most categories, except for shelter costs. The report also highlights potential risks to the forecast, including global tensions impacting energy prices and house price increases in Canada.
The Governor emphasized the importance of not prolonging restrictive monetary policy unnecessarily, balancing the need to bring down inflation while supporting economic activity. The data since January have reinforced confidence in the downward trajectory of inflation while indicating positive economic growth.
In response to inquiries about the timing of a policy interest rate cut, the Governor noted that while progress towards price stability is evident, further observation of core inflation evolution is required for confidence in sustained progress.
In conclusion, the Bank of Canada remains vigilant in monitoring economic indicators and inflation trends to ensure a balanced approach to monetary policy. The Senior Deputy Governor and Governor welcomed questions from the committee, underscoring the importance of sustaining progress in the fight against inflation.