The BoC will be pleased with Feb. inflation data: UBS Canada’s Pierre Ouimet
Following the release of Canada’s latest inflation data, one economist said he thinks the Bank of Canada should be comfortable with its actions thus far as it attempts to restore price stability.
According to Statistics Canada, the inflation rate cooled in February as the consumer price index was 5.2 per cent higher than the previous year, but markedly lower than the 5.9 per cent reported in January. February’s inflation figures marked the largest deceleration since April 2020.
“Generally speaking, I think this is the type of report the governor [of the Bank of Canada] would look at and be reasonably comfortable about the decision that he's taken so far,” Jean-Francois Perrault, a senior vice-president and chief economist at Scotiabank, said in a television interview with BNN Bloomberg Tuesday.
On March 8, the Bank of Canada held its policy rate at 4.5 per cent, but stated that it is prepared to raise rates again if economic circumstances change.
Canadian inflation peaked at 8.1 per cent in June 2022, but Perrault said it has been difficult to forecast.
“The challenge that we have on the inflation side is [that] it has actually been very difficult to forecast inflation in the last couple of years and we've tended to underestimate inflation,” he said.
“Now, in Canada, it's been doing reasonably well, in terms of the direction [of inflation] and how we thought it was going to go for the last several months.”
As the Bank of Canada works to bring inflation back to its two per cent target, Perrault said he does not anticipate interest rates to come down this year.
“I think the inflation fight is far from over. There will be a rate cut at some point. To us, it seems less likely that occurs this year, rather than early next year,” he said.
"But to the point about the banking developments in the United States, if we find ourselves with a much weaker economic environment than we are currently considering…it could very well be that we end up in a world where rates in Canada and the U.S. and maybe other parts of the world need to be cut sooner rather than later.”