Bank of Canada rethinking inflation framework amid persistent shocks: Rogers

A senior official at the Bank of Canada says the central bank is reconsidering how it thinks and talks about inflation as it prepares to review its five-year mandate later this year.

Bank of Canada senior deputy governor Carolyn Rogers is in Brandon, Man., today speaking to a business audience about how the central bank is grappling with a series of economic shocks in recent years.

Rogers says in prepared remarks that the oil price spike from the Iran war is squeezing consumers and businesses but it’s still too soon to say what the conflict will mean for growth and inflation in Canada.

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She also concedes that the Bank of Canada underestimated how persistent inflation would be after the COVID-19 pandemic and says the central bank is working to get a better grasp on where price pressures are heading.

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Rogers says the central bank is changing how it detects supply shocks in the economy and is reviewing how it talks about core inflation and housing affordability to make sure Canadians understand how the Bank of Canada’s benchmark interest rate interacts with those forces in their everyday lives.

She also says the Bank of Canada has heard from Canadians that they value stability in inflation as well as interest rates, which she says is a good reminder after years of rapid changes in the policy rate.