(Recasts with economists' comments on Bank of Canada's
By Randall Palmer
OTTAWA, June 16 Canadian economists are not too
concerned about low inflation, Finance Minister Joe Oliver said
after meeting several of them on Monday, sending a different
message than the one sounded recently by Bank of Canada Governor
Overall inflation rose to the central bank's 2 percent
target in April, but Poloz said last week that underlying
inflation is still at a low 1.2 percent, which leaves Canada
"vulnerable to a downside shock at any time".
Asked about an apparent divide between the economists and
the Bank of Canada, Oliver said: "I'm not going to delve into an
area which is the responsibility of the Bank of Canada, but I
can say that the private-sector economists are certainly not
worried about high inflation. If there is a risk, it would be on
the downside, but they are not too concerned about that risk."
The issue is significant because the central bank has cited
low inflation, and the risk of it falling, as a reason not to
raise interest rates.
Two of the economists who met Oliver on Monday, and spoke to
reporters later, echoed his remarks about not being concerned
about low inflation, though a third, Sebastien Lavoie of
Laurentian Bank Securities, said he agreed with the Bank of
Bank of Montreal chief economist Doug Porter said he thought
the central bank should have changed its tone in its June 4 rate
statement, when it said "the downside risks to the inflation
outlook (were) as important as before".
"It's perplexing to the average person that the Bank of
Canada, I would suggest, is concerned about low inflation when
we see record-high gas prices and 2 percent headline inflation,
and some food components that are rising quite quickly," he
said, speaking in the lobby of the Finance Department building.
"I think they do risk a bit of credibility with...the person
on the street...by continuing to drum on about how their biggest
concern is low inflation when we've effectively got 2 percent
Porter said one of his bigger concerns is just how strongly
prices for oil, natural gas and gasoline have risen, catching
TD Bank chief economist Craig Alexander sees overall
inflation possibly dipping back below 2 percent in the near
future. But he said he sees core inflation, which was 1.4
percent in April, gradually rising to the central bank's target.
"I don't see inflation moving meaningfully downward, nor do
I actually see it heading well above the Bank of Canada target
for the foreseeable future," he said.
Laurentian's Lavoie, on the other hand, cited "lowflation"
as a key risk facing the Bank of Canada and central banks around
the world, saying inflation expectations may fall and prove hard
"The risk...is still to the downside, and I tend to agree,
actually, with the tone of the bank that was set a few weeks
ago," he said, noting, however, that Canada does not face a
significant risk of deflation, in contrast to the euro zone.
(Editing by Peter Galloway)