Inflation is “transient” but not “short-lived”, bitcoin is not a “digital currency”, BoC Governor Macklem

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(Kitco News) The latest version of what “transient” inflation really means came from Bank of Canada (BoC) Governor Tiff Macklem.

The BoC governor called inflation “transient but not short-lived”, noting that it will last longer than expected.

“I think transient for economists somehow means not permanent,” Macklem said in a CTV Question Period interview with Evan Solomon. “I think for a lot of people transient means it’s going to end quickly and maybe I’m not sure what the right word is, but it’s probably something like, you know, transient but not short. duration.”

The latest inflation figures from Canada showed inflation stood at 4.4% in September, with the BoC estimating price pressures to accelerate to 5% by the end of this month. year.

The BoC governor also took the opportunity to reassure Canadians that the central bank will keep price hikes under control. “We have the tools, we have the mandate, and we will adjust our tools to bring inflation back on target,” Macklem added.

The BoC surprised the markets at the end of October by ending its quantitative easing while keeping the key rate stable.

“The Bank ends quantitative easing (QE) and enters the reinvestment phase, where it will buy Government of Canada bonds only to replace maturing bonds,” the BoC said in a statement. .

The BoC has also advanced its rate hike schedule to next year. “We said it would be around the middle of next year,” Macklem said in the interview. “If you want it in months, between April and September.”

Gold rallied in response, with the Canadian dollar-valued precious metal last trading at seven-week highs – $ 2,272.22, up 0.32% on the day.

In the United States, all eyes are on the latest inflation data, which will be released on Wednesday. Market consensus predicts that the October CPI will settle at 5.8% on an annual basis.

Some economists expect the US inflation rate to reach 6% by the end of 2021. Core inflation will exceed 5%, “said ING chief international economist James Knightley.

At its November meeting, the Federal Reserve acknowledged the uncertainty surrounding rising inflation.

“Inflation has been higher than expected. The bottlenecks have been more persistent and are set to persist until next year. I don’t think we’re late. The policy is well positioned to deal with the range of plausible outcomes. It will be premature to raise rates today. We want to see the job market heal further, ”Fed Chairman Jerome Powell said at a conference following the Fed’s interest rate announcement.

Powell also attempted to clarify the definition behind transient. “Medium-term inflation… is our job. The level of inflation that we currently have is not compatible with price stability,” he said. “For us, the transient means that it will not leave behind permanent or ever higher inflation… We recognize the uncertainty surrounding the transient.”

During the interview, BoC Governor Macklem was also asked about Bitcoin and whether cryptocurrency is part of Canada’s digital future. “Be clear, Bitcoin is not a digital currency,” he replied. “People don’t use Bitcoin to buy things.”

Macklem also called bitcoin an investment.

As for the development of Canada’s own central bank digital currency (CBDC), it is up to the Minister of Finance to decide.

“We have banknotes, and we’re going to have banknotes, at least while I’m governor, they won’t leave,” Macklem said. “At the same time, we know that our economy is becoming more and more digital, and the pandemic has accelerated that.”

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