Skate to where the puck is going to be

Economics Reports

The Week Ahead

 

Skate to where the puck is going to be

To borrow from a famed hockey player, optimal monetary policy entails skating to where the puck is going to be, not to where it is. Core inflation measures in Canada would suggest that the Bank of Canada should be holding steady on rates in June, with April ex-energy measures coming in on the high side. That may well be the Bank’s decision in two weeks, but it would based on where the puck is now. In terms of where it’s headed, the coming week’s GDP news will shed much more light, given the weight that the central bank rightly assigns to economic slack, the so-called “output gap,” in steering turns in inflation.

Learn more in the report below. 

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