BoC’s Gravelle: We need to see further progress in inflation

While we saw some welcome improvement in inflation measures in October, we must remember it's just one month. We need to see further progress. 

The economy is now roughly in balance, but we are closely watching inflation expectations, wage growth and corporate pricing behaviour. These indicators are helping us assess whether inflation is on a sustained path to 2%.

The recent increase in immigration boosted consumption in the near term, but we estimate that that alone did not have a significant impact on inflation. However, due to Canada’s existing housing supply challenges, population growth has added to the pressure on shelter price inflation. Had builders been able to respond more flexibly to the increased demand, it would have helped reduce upward pressure on rent and housing prices.

Newcomers have helped loosen tight labour markets and have significantly improved our country’s potential growth, which will help keep a lid on inflationary pressures in the long run. But Canada needs more homes. And we need to make our housing supply more responsive to increases in demand. This will allow us to properly welcome new arrivals and to ensure all Canadians have an affordable place to live.