BOC Gravelle: Acknowledged a welcome improvement in Oct inflation measures but more to do.

Bank of Canada’s Gravelle speaking after the Bank of Canada’s rate decision yesterday where the central bank kept rates unchanged at 5.0%.

Below are the highlights from his speech where he acknowledged a welcome improvement in October inflation measures but emphasized the need for further progress to achieve price stability.:

  • Shelter Price Inflation: Gravelle noted that housing imbalances have serious consequences for shelter price inflation, contributing 1.8 percentage points to the total October inflation rate of 3.1%.
  • Housing Supply Response: Emphasized the need for Canada to have more homes and a housing supply that is more responsive to increases in demand.
  • Demographic Demand and Supply Issues: Pointed out that a jump in demographic demand, coupled with existing structural supply issues, could explain why rent inflation continues to climb.
  • Government Collaboration: Stressed the importance of all levels of government working together on housing policies to boost supply.
  • Capacity and Flexibility: Urged the reduction of barriers to adding capacity and ensuring market flexibility to meet future changes in housing demand.
  • Housing and Inflation: Warned that without more house building, inflationary pressures in the shelter sector could continue to build.
  • Rent Inflation: Highlighted that rent inflation reached a 40-year high in October, with housing supply not keeping pace with recent increases in immigration.
  • Housing Activity: Reported that housing activity grew 8.3% in Q3 but remains far below the level needed to meet growing housing needs.
  • Immigration’s Impact: Commented that recent increases in immigration have boosted near-term consumption but haven’t significantly affected inflation.
  • Economic Balance: Noted that the economy is now roughly in balance, with a focus on monitoring inflation expectations, wage growth, and corporate pricing behavior.
  • Inflation Path: Stressed the importance of indicators in assessing whether inflation is on a sustained path to the 2% target.

This article was written by Greg Michalowski at Source