By Paul Vieira
Inflation remains a concern for the Bank of Canada, with uncertainty surrounding when price increases will slow to the target rate of 2%, according to a senior official.
Nicolas Vincent, Deputy Governor at the Bank of Canada, stated that higher interest rates are working towards restoring balance between supply and demand. Despite keeping the benchmark rate at 5% due to a weaker economy and decreased labor-market pressure, recent data indicated a 4% inflation acceleration in August, the highest in four months. This led to a revised forecast of inflation returning to 2% in mid-2025, six months later than previously expected.
Vincent acknowledged the continued uncertainty, stating, “It is clear that we are not out of the woods yet.” Concerns persist about underlying inflation and its impact on price stability.
The Bank of Canada will announce its next interest-rate decision on Oct. 25.
Vincent’s speech primarily focused on monitoring corporate-pricing behavior as an indicator of dissipating inflationary pressures. While some progress has been made towards normal pricing behavior pre-pandemic, there is still a long way to go.