Canada's inflation rate went down from 5.9% in January to 5.2% in February
Considering the latest inflation data, the Bank of Canada is more than justified to stay the course when it comes to its current inflation-management strategy, said Jean-Francois Perrault, senior vice president and chief economist at Scotiabank.
Fresh data from Statistics Canada this week showed that the inflation rate went down from 5.9% in January to 5.2% in February, in the most significant deceleration registered since April 2020.
After a 425-basis-point increase over the course of a year, the central bank held its policy rate at 4.5% on March 8, with the caveat that rates can still go up should future economic developments justify such moves.
“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,” Perrault said in an interview with BNN Bloomberg.
“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… 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.”
Perrault is not expecting the BoC to lower its policy rate anytime this year, mirroring recent predictions by CIBC and BMO.
“I think the inflation fight is far from over,” he said. “There will be a rate cut at some point. To us, it seems less likely that occurs this year, rather than early next year… 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 US and maybe other parts of the world need to be cut sooner rather than later.”
