The relationship remains strong in Canada
Lately, there has been talk about whether the relationship between growth and inflation still exists. That’s because inflation rates in the United States and other advanced economies have been lower in recent years than you might expect given relatively strong growth.
Here in Canada though, the story looks quite different.
At the Bank, to help us see the underlying trend of inflation, we rely on a number of core measures that strip out goods whose prices move around a lot, like gasoline or imported fruits and vegetables. The behaviour of these measures in recent years gives us confidence in the link between inflation and growth in Canada.
Since 2017, the measures of core inflation that we follow closely have been hovering at around 2 percent. That’s consistent with our view that the economy has been operating close to its speed limit.