The Bank of Canada has not won its inflation battle yet
target range of 1 per cent to 3 per cent – a territory we haven’t inhabited in 27 months. It was the longest stretch that inflation has been above the target range since the central bank adopted inflation targeting in 1991.
In short, at least on paper, inflation has exited the red zone in which higher interest rates are pretty much compulsory for our central bankers. We’re in familiar territory for the Bank of Canada, where it is well equipped to keep inflation under control – something that was absolutely in doubt a year ago, when the inflation rate surged above 8 per cent.
One piece of baggage that provides a mixed signal is that of mortgage interest costs. They have spiked 30 per cent over the past year, a consequence of the Bank of Canada’s own sharp interest-rate increases aimed at cooling inflation. If you exclude mortgage interest costs from the calculation, inflation in June was 2 per cent on the nose.
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