The head of the Bank of Canada says he’s fine with last month’s hot inflation number because he sees it as just a temporary spike in the data.
Statistics Canada recently reported that year-over-year consumer prices rose at their fastest pace in nearly seven years in July when they reached 3%.
In an interview Friday with CNBC, governor Stephen Poloz says the underlying or core inflation rate —which omits volatile items like gasoline prices — remained close to the central bank’s ideal target of 2%.
Poloz says the inflation boost was caused by the one-time effects of higher energy prices, minimum-wage increases and exchange-rate movements.
Speaking in Jackson Hole, Wyo., ahead of this weekend’s annual meeting of central bankers, Poloz says the Bank of Canada had been expecting inflation to move higher this year on a short-term basis.
But last month the Bank of Canada predicted inflation to only rise to 2.5% this year before it slows back down to about 2%.
“These are transitory factors,” he said when asked about July’s 3% inflation reading.
“Our measures of core inflation, which extract all the noise from the data, are all right around 2% — so, very close to target.”
The central bank raises its interest rate as a way to help keep inflation from climbing above its ideal target range of one to 3%.
Poloz introduced a quarter-point increase to the benchmark rate in July for his first move in six months. It was his fourth hike in a year and brought the interest rate to 1.5%.
In the interview, Poloz said he still sees more interest rate hikes on the horizon for Canada. Some economists believe he could raise the rate again as early as next month.