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Inflation’s last mile to Bank of Canada’s 2-per-cent target could be a long and winding road

Stephen Brown, deputy chief North America economist at Capital Economics, said central bankers may be inclined to keep talking tough about inflation. But he said waiting too long to cut rates could be an error that leads to an unnecessary recession.

“Services excluding housing, and core goods inflation, are both at 2 per cent. Food inflation is still high, but we know on a three-month annualized basis, it’s about 2 per cent. Energy inflation shouldn’t be too problematic this year,” he said. “So unless you really think the bank needs to keep the policy rate high because of high rent inflation, I really struggle to understand this case that the bank needs to keep policy very restrictive for much longer.”

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