By Julie Gordon and David Ljunggren
OTTAWA (Reuters) – The Bank of Canada on Tuesday said inflation remained “too high” even as data showed price pressures were easing off peak levels, and pledged to continue to do whatever was needed to bring it back to target.
Deputy Governor Paul Beaudry, speaking to university students in Waterloo, Ontario, also said while some have suggested a recession might be needed to tame climbing prices, the central bank believed it could lower the risk of a hard landing by clearly communicating its intentions.
“In August, inflation stood at 7%. While we’re headed in the right direction, that’s still too high,” Beaudry said in prepared remarks provided ahead of the speech.
“We will continue to take whatever actions are necessary to restore price stability for households and businesses and to maintain Canadians’ confidence that we can deliver on our mandate of bringing inflation back to 2%,” he later added.
Inflation slowed again in August, though at 7.0% it remains well above target. The three core measures of inflation, which taken together are seen as a better indicator of underlying price pressures, also eased slightly.
Beaudry said the best way to tackle hot inflation was to ensure Canadians understand and believe the central bank can tame prices, which will keep expectations moored. To do this, the bank must be clear in its message, he said.
“The more effective the Bank can be in its guiding role, the greater the chance of a soft landing – and the lower the risk of a hard landing.”
The Bank of Canada has increased its policy rate by 300-basis points in just six months and earlier this month signaled it was not yet done. Money markets are betting on another 50-bp increase in October to 3.75%.
The Canadian dollar was trading 0.8% lower at 1.3360 to the greenback, or 74.85 U.S. cents.
(Reporting by Julie Gordon and David Ljunggren in Ottawa; additional reporting by Fergal Smith in Toronto)
