By Promit Mukherjee
OTTAWA, June 25 (Reuters) – The Bank of Canada’s consultation on its monetary policy framework review found broad support for its 2% inflation target, but participants complained about the disconnect between official inflation data and actual price of goods, the bank said in a report on Thursday.
The cost of living crisis is a challenge for Prime Minister Mark Carney who pledged to tackle affordability after his party won a parliamentary majority in April.
“Canadians in all communities the Bank visited expressed concern with the cost of living,” the bank said in the report.
“Many indicated that the consumer price index (CPI) did not align with their experience or with what they see when they shop,” it said,
The disconnect between official inflation data and daily experiences led to diminished trust in the CPI number, and, by extension, in the central bank, the report said.
Canada’s annual inflation rate in May accelerated to 3.2%, the first time in nearly two and a half years that headline inflation moved outside the BoC’s 1%-3% target range as the impact of higher crude oil prices due to the Iran conflict continued to filter through to gasoline costs.
Governor Tiff Macklem said earlier this week that while food prices were a concern, the current spike in inflation was largely concentrated in gasoline costs.
The central bank and the finance ministry jointly review the target every five years and formally announce a decision, with the next review set for this year.
Young Canadians who participated in the consultations said they have largely abandoned hope of ever owning a home. They dismissed the central bank’s explanation that housing affordability falls beyond its mandate, the bank said.
While some economists called for greater emphasis on rent inflation in the BoC’s research and communication, most economists argued to keep mortgage interest costs as part of the consumer price index.
(Reporting by Promit Mukherjee; Editing by Caroline Stauffer)
