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BOC’s Expects Greater Use of Guidance, QE to Reach Inflation Target

Given the low level of global rates, Bank of Canada Gov. Tiff Macklem said the central bank may need to make more use of forward guidance and large-scale asset purchases in response to future economic shocks to ensure inflation reaches its 2% target.

In a speech Wednesday, Macklem provided more insight into the central bank’s new marching orders, which included some leeway to allow inflation to overshoot the central bank’s 2% target. Macklem made it clear that flexibility won’t apply in situations — like now — when inflation is way above target.

Bank of Canada Governor Tiff Macklem underscored that price stability is central to its renewed mandate and indicated that any new flexibility will apply only at times when inflation is low or the economy is weak.

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