BoC's Macklem: Trade disruptions may increase variability of inflation

Eren Sengezer FXStreet

Bank of Canada (BoC) Governor Tiff Macklem said on Tuesday that trade disruptions may mean larger deviations in inflation from the BoC's 2% target, per Reuters.

Key takeaways

"We have to focus on risk management, balancing upside risks to inflation with downside risks to economic growth."

"Trade disruptions may also increase the variability of inflation."

"Cost of global goods may not fall as fast as globalization, and that could put more upward pressure on inflation."

"Pandemic showed that when an economy is already overheated, supply disruptions can have an outsized effect on inflation."

"The growth we are seeing in trade is shifting from goods to services; pandemic may have provided a more durable boost to trade in services."

"Global trade has slowed and that is a big concern for Canada."

"Security risks are real and need to be addressed, but it is important they not become a pretext for inefficient protectionism."

"Seemingly vast potential of digitalization suggests future growth in trade will tilt to services."

"Canada needs to build better trade relationships and produce the products people want to buy."

Market reaction

These comments failed to trigger a noticeable reaction in USD/CAD. At the time of press, the pair was up 0.1% on the day at 1.3575.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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