Bank of Canada chief: Supply chain problems mean inflation set to be more stubborn

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OTTAWA — Global supply chain bottlenecks are not easing as quickly as expected, meaning inflation in Canada and among IMF members will probably take a little longer to come down, the governor of the Bank of Canada said on Thursday.

Those issues will weigh on Canada’s near-term economic recovery, meaning it is reasonable to expect that an expected rebound will not be as fast as the central bank forecast in July, Tiff Macklem told reporters after attending International Monetary Fund meetings in Washington.

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“These bottlenecks are not easing as quickly as expected. And there was certainly a strong consensus these issues warrant continued attention and they are going to take some time to work through,” Macklem said of his talks with central bankers.

“What this all means, in all our countries, is that inflation – measures of inflation – are probably going to take a little longer to come back down,” he continued.

The concern now, he said, was that bottlenecks looked to be more complicated and persistent than previously thought, although they continue to be viewed as transitory.

Macklem also looked to quell public criticism over the bank’s stance that high inflation is temporary. Canada’s inflation rate accelerated to 4.1% in August, well above the 2% midpoint of the bank’s 1-3% control range.

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“Our job … is to make sure that these one-off price increases don’t become ongoing inflation. We think there’s good reasons to believe that these are one-off price increases. They won’t create ongoing inflation,” he said.

Macklem also said slack remained in Canada’s labor market, despite employment returning to its pre-pandemic level in September.

“It is an important milestone, but it’s not the destination,” he said. “We’ve had growth in our labor force … so slack in the labor market remains.”

Pointing to young people and women, he said: “Job growth has been particularly concentrated in the areas that needed it most.” But low-wage worker employment is still well below pre-pandemic levels, he added. (Reporting by Julie Gordon and David Ljunggren in Ottawa; Editing by Peter Cooney)