“Well-anchored inflation expectations in Canada will be tested by the coronavirus pandemic,” Bank of Canada Deputy Governor Lawrence Schembri said on Tuesday.
Achieving the bank’s 2% inflation target depends on the credibility of this target and the anchoring of public expectations.
“Having a credible inflation target during a large and persistent shock is of crucial importance.”
If inflation expectations had not been firmly anchored during the pandemic, more monetary stimulus would have been necessary.
“Recognizing and better understanding the gap between perceived and measured inflation is very important.”
“People will ignore temporary inflationary movements if they are confident that inflation will stay on target in the long term.”
“Because of this confidence, the bank has the flexibility to see through temporary movements in inflation.”
“To effectively influence inflation expectations, the bank must communicate often, clearly and consistently.”
The USD / CAD pair showed no reaction to these comments and was last seen posting small daily losses near 1.3200.