Tiff Macklem’s dashboard: Tracing the economy’s exit from the pandemic puzzle

Governor Tiff Macklem said the path of interest rates will be determined by a series of indicators. We’ve done our best to reverse engineer what Macklem’s dashboard looks like by turning hints on data that the central bank is interested in into charts, then updating them when new numbers arrive.

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Bank of Canada Governor Tiff Macklem has one goal: to manage inflation, which the central bank defines as keeping the Consumer Price Index (CPI) at an annual rate of around 2%.

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The pandemic has made achieving this goal more difficult than usual. The CPI is well over three percent. In isolation, this implies that Macklem has left interest rates too low for too long.

But the context is important. The Bank of Canada is betting that the current inflationary surge is exaggerated by a short-term imbalance of supply and demand; once vendors grow to meet the desire to spend of freed up consumers, the insane price increases of the past few months are expected to subside. In fact, Macklem fears that deflationary forces will continue to linger below the surface. Labor markets are still weak, suggesting demand could be lackluster once the euphoria over the release of COVID-19 lockdowns wears off.

It’s a puzzle, and it won’t be solved by looking at a few numbers like the CPI and the unemployment rate. So the Financial Post put together a series of indicators to try to recreate the dashboard that Macklem could use to help him decide the path for interest rates. When most indicators are above their pre-pandemic levels, Macklem and Bank of Canada MPs will likely be ready to start raising interest rates. As a quick scan of the dials will show, that won’t happen anytime soon.

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