Canada’s economy will undergo volatility and inflationary acceleration as the nation recovers from the coronavirus pandemic, warns the governor of the Bank of Canada.
“The process of reopening the economy won’t be entirely smooth,” said Tiff Macklem in a speech announcing the release of the central bank’s monetary policy report. “For example, we are experiencing supply bottlenecks for some goods and services as demand rebounds faster than supply can ramp back up. These unique circumstances of the pandemic are now helping to push inflation.”
The Bank of Canada said it expects the country will see inflation above three per cent through 2021, before falling back to above two per cent in 2022. Canada’s failure to maintain an inflation rate between one and three per cent targeted by the central bank could be blamed on factors caused by the coronavirus pandemic and recovery, said Macklem, identifying these factors as the high price of gasoline, a sharp drop in demand from consumers and a disruption to global supply chains.
Despite the expected volatility and inflationary rise, he said the central bank had “increased confidence” in the economy, though it was paying “continued attention.” He pointed to recent employment figures as a clear, if muted, portend of the nation’s positive recovery outlook.
According to the latest figures from Statistics Canada, the country created more than 260,000 jobs in June. While this was a 1.2 per cent gain over the previous month, the gains were eclipsed by overall job losses reported in the two previous months. In April and May 2021, Canada saw cumulative job losses of about 275,000 jobs.
“But to get back to the pre-pandemic employment rate, we still have more than 500,000 jobs to recoup.”