Bank of Canada: Gradual monetary tightening

2022-04-28 0 By

PRCBroker’s exclusive earnings highlights:■ CPI inflation accelerated to 5.1% year-over-year in January, surpassing the bank’s target for the tenth straight month ■ January jobs report shows signs of a stalling recovery, including a drop in payrolls and a rise in the unemployment rate statistics Canada reported Jan. 16 that the Consumer Price Index (CPI) accelerated to 5.1% in January from a year earlier.CPI rose for the tenth consecutive month, exceeding the bank’s 1-3% target, mainly due to higher prices for food, housing and accommodation.Bank of Canada Deputy Governor Ryan said, “We will use our monetary policy tools to respond flexibly and, if necessary, more forcefully to whatever the situation may be,” indicating the bank is more focused on the upside risks to inflation.The central bank expects inflation to fall sharply in the second half of the year, but reiterated that multiple rate hikes should be expected.Market participants see at least five rate hikes before the end of the year, in addition to a hike in the policy rate from 0.25% to 0.50% at the March 2 meeting.On the other hand, 200,000 fewer people were added to the labor force in January than the previous month, and the decline was reflected in full – and part-time jobs and industries.The unemployment rate rose to 6.5 percent, while average hourly wage growth for full-time employees slowed to 2.4 percent from a year earlier.After the omicron strain spread, tighter regulation led to a deterioration in employment.Truckers have been protesting mandatory vaccinations and government measures to combat the coronavirus since late January, leading large trucks to block the Canada-US border bridge.A major U.S. consulting firm estimated that the auto industry lost $299.9 million in two weeks as the border shutdown disrupted logistics and forced factories to shut down.While tightening monetary policy is a top priority for boc, it should also carefully distinguish whether the deterioration in the graduation data is temporary and aim for a gradual increase in policy rates rather than a sudden increase.