BoC's Schembri: Have flexibility to see through temporary movements in inflation

Eren Sengezer FXStreet

"Well-anchored inflation expectations in Canada will be tested by coronavirus pandemic," Bank of Canada (BOC) Deputy Governor Lawrence Schembri said on Tuesday.

Additional takeaways

"Achieving bank's 2% inflation target depends on the credibility of that target and anchoring of the public's expectations."

"Having a credible inflation target during a large and persistent shock is critically important."

"Had inflation expectations not been well anchored during the pandemic, more monetary stimulus would have been necessary."

"Acknowledging and better understanding of the gap between perceived and measured inflation is very important."

"People will shrug off temporary movements in inflation if they are confident inflation will remain on target in the long run."

"As a result of this confidence, the bank has the flexibility to see through temporary movements in inflation."

"To be effective in influencing inflation expectations, the bank should communicate often, clearly and consistently."

Market reaction

The USD/CAD pair showed no reaction to these comments and was last seen posting small daily losses near 1.3200.

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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