Stubborn inflation could lead the Bank of Canada to maintain high interest rates for a longer period of time, according to an economic outlook from Deloitte. Canada’s economy contracted slightly in the second quarter of 2023 and Deloitte is forecasting continued GDP decline.
Vincent made the comments in his first speech as deputy governor today to the Chamber of Commerce of Metropolitan Montreal. According to his prepared remarks, Vincent says the Bank of Canada believes that higher-than-expected inflation over the last year is “intimately linked” to larger and more frequent
Although he notes pricing behaviour by firms has been shifting closer to normal since the beginning of the year, that progress has been slow. Recent research from the central bank shows price increases have mirrored the cost increases businesses have faced, but Vincent notes that even stable profit margins would mean customers are carrying the entire burden of higher prices.Vincent says these recent discoveries about the affect pricing behaviour may be having on inflation is leading the Bank of Canada to question the relationship between inflation and its drivers.