The Russian invasion of Ukraine has heightened inflationary pressures globally and in Canada, a Bank of Canada official said Friday.
In a videoconference speech to the Federal Reserve Bank of San Francisco, central bank Deputy Governor Sharon Kozicki said near-term inflation is expected to be stronger than the institution forecast in January. due to rising oil and other commodity prices.
“The generalized price pressures are a major concern for us: around two-thirds of the components of the consumer price index now show inflation above 3%,” explained Mr.me Kozicki in the prepared text of his speech.
“However, inflation that remains high increases the risk that longer-term inflation expectations will start to rise.”
The central bank’s next announcement on its key interest rate is scheduled for April 13. It will take advantage of this announcement to update its quarterly economic forecasts.
Mme Kozicki said he expects the pace and magnitude of future rate hikes and the bank’s plan to reduce the size of its Government of Canada bond portfolio will be key elements of the deliberations. the central bank.
The Bank of Canada raised its key rate by a quarter of a percentage point earlier in March to 0.50% to fight inflation. Further rate hikes will be required to bring inflation, which is at a three-decade high, under control.
In its January monetary policy report, the Bank of Canada projected annual inflation of 5.1% in the first quarter of 2022, and an average of nearly 5.0% for the first half of the year.
According to Statistics Canada, annual inflation reached 5.7% in February, after settling at 5.1% in January.
In her speech, Sharon Kozicki observed that the pandemic had had an unequal impact on households, noting that low-wage workers, especially women and young people, were the hardest hit.
And now low-income people are also particularly affected by inflation.
“As consumer staples such as gasoline and food are experiencing the fastest price increases, all households are affected by high inflation. But my colleagues and I are aware that this situation is particularly painful for low-income households, as they tend to spend a greater proportion of their income on these items,” said Ms.me Kozicki.