Bank of Canada trying to determine why inflation has been on decline

Inflation is now below its ideal target of two per cent


MONTREAL – A senior official says the Bank of Canada is still trying to figure out exactly why inflation has been on the decline since 2012 and fallen below its ideal target of two per cent.

In what he calls his last speech as the central bank’s senior deputy governor, Tiff Macklem says the economic puzzle appears to reflect a combination of bad and good disinflation.

He says bad disinflation stems from persistent excess supply in the economy, while good disinflation results from more competition in the retail sector.

Macklem says in theory, monetary policy should work to counter bad disinflation stemming from weak demand.

But in practice, he says it’s more like an exercise in risk management, as there’s still considerable uncertainty surrounding the bank’s measurements and projections.

Macklem says while the fundamental drivers of growth and future inflation appear to be strengthening, inflation is expected to remain well below target for some time, which means the downside risks have grown in importance.

“We need to do our best to determine why inflation is below target, but no matter how hard we try, there will be uncertainty about our diagnosis,” Macklem said in remarks prepared for delivery at Concordia University.

“Our work at the Bank of Canada is both to sharpen the analysis as much as we can and, at the same time, to take account of the risks and uncertainties as we determine the appropriate course for monetary policy to achieve our inflation target.”

Some uncertainty about the bank’s judgments include how long increased competition will depress inflation, he said. Increased retail competition will continue to drive prices lower for about another year.

While there are no signs of a rebalancing towards exports and business investment in Canada, the strengthening of the global economy and the recent depreciation of the loonie should foster a broadening of the composition of growth in Canada, Macklem said.

Filed under:

Bank of Canada trying to determine why inflation has been on decline

  1. Walmart, lower average quality of jobs, and high cost of housing. It will be very scary & will get much worse for many many years to come.

    • Hazards of big government, all that is left is low end service jobs. Isn’t that they don’t get paid enough, its that the value of that income isn’t worth much. Remove all taxes realized and hidden including tax-inflation, and minimum wage is actually quite good.

      Too much affects from all taxations drive up the cost of living and makes debt-tax infatuated Canada an uneconomical place to do other jobs like manufacturing.

      And Walmart provides entry level jobs for those willing to work up. My first job was at a retail chain for $1.62/hr. Taught me services for money, and made a career out of and retied early at 54 as it no longer paid me enough to work.

      You are right, with depreciating money, less money from taxes, people have less to spend on other peoples jobs. As it is affordable exchange of goods and services that drive jobs, and we collectively don’t have the value money to drive the jobs like we used to.

  2. HELLO… the reason inflation is on the decline is because the Bank of Canada doesn’t include HOUSE prices, EDUCATION costs and TAX increases in its inflation index… because i mean what average Canadian lives in a dwelling that they pay interest on, sends a kid to college or university (up 40% in the last 5 yrs alone) or pays our Ontario-Liebral-mandated daily-increased taxes right?

    • Yep, lies with BS statistics that are not evaluated correctly.

      Even BoC calculator doesn’t reflect real world costs. Its designed to BS the people. But we are well conditioned not to question the lies and deceit from our own governments and their agenies.

    • Absolutely correct. We have inflation that just doesn’t show up in the CPI. The CPI is just an estimate of inflation, and probably not nearly a broad enough measure. But nearly everyone from the BoC on down treats the CPI and inflation as though they were one and the same.

  3. I can’t afford to buy things like a lot of other people. How does that help the economy, I have just enough money for food, shelter and the balance is taxes!

    • Oh puleez

  4. Just clueless idiots. As our household inflation is 6% and above for two years now. Sorry BoC, we don’t all live on KD and bananas. Property taxes up 6.5%, groceries up 6.7%, home insurance up 14.3%, auto insurance up 7.1% utilities up 9.3%…..

    BoC, prove your claims of low inflation and show the people the math and incorrect assumptions you make. Or is this pushing propaganda to deceive the people?

    I just watched a needed fridge replacement go form $1999 to $2199 because the loonie lost 10 cents of value for 11% of inflation.

    If their are price decreases, its because no one has the money to buy it. Demand is weak as we are too busy paying taxes, real, employment, hidden and taxes as inflation….. in fact, with the dollar drop CBSA customs and duties hidden taxes will go up from $40+ billion to $45 billion, gotta tax the poor people on food too.

    Maybe they have lived in the glass house too long to see reality?

  5. Living in a glass house to long gets warped concepts of reality.

    I challenge BoC to justify their inflation claims with publicly disclosed facts and numbers that justify the results. Otherwise I have to say they are bold faced liars.

    Why they deceive us is simple. They pay less CPP, less disability, less to vets as increases are well below real inflation. They pay less interest on debt than inlfation which makes Canadian governemtn debt a fraud, ponzi fraud of print no value inflation money for debt as legitimate lenders no longer buy governemtn debt.

    They lie so unions don’t see real inflation and jack up excessive wages demands in our tax inflated economy of debt.

    Talk TSX gains of 9%, these were really negative value return taxable inflation gains. 9% taxable TSX gains, 11% devalued money makes 9% – 3% (taxes) – 11% devalued money (inflation) for a real value loss of 5% value loss. A negative value economy of debt-tax fraud. Its why I and others did like CPP, sent some investments offshore to avoid the CAD currency failure.

    So when the costs of autos, alliances, home materials, food et al. go up 11% for the lower value money, I am sure StatsCan will lie about it. Its your government deceiving you to so you get less and they can keep their fraud going.

  6. I am convinced the BOC inflation calculation is flawed.

    • They don’t calculate inflation. StatsCan does. And yes, the CPI is flawed.

Sign in to comment.