Opinion: The Bank of Canada rediscovers good old-fashioned ‘excess demand’

Now, the bank forecast in its quarterly projections in April that inflation wouldn’t retreat to the 2-per-cent target until the end of 2024, which is toward the outer limits of the 18- to 24-month horizon on which interest-rate policy is built.

To be fair, the bank has said all along that it was prepared to resume rate increases if conditions warranted. Perhaps it wasn’t as clear as it could have been about which conditions. But we could have reasonably assumed that a substantive increase in excess demand would be a key factor; the gap between overall supply and demand in the economy is always central in setting monetary policy.

The big question now is, where do we go from here? In the absence of a quarterly Monetary Policy Report and an accompanying news conference with the Governor, we’re left sifting through the rate announcement for clues.

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