FRANKFURT, July 4 (Reuters) - Inflation in Canada should be well into an uptrend by the first half of 2018, Bank of Canada Governor Stephen Poloz told German newspaper Handelsblatt, adding that policy normalization must begin before price growth hits its target.
“If we only watched inflation and reacted to inflation, we would never reach our inflation target, we’d always be two years behind in the reaction,” Handelsblatt quoted Poloz as saying on Tuesday.
“So we have to look at the rest of our indicators in the models that predict inflation,” he added, suggesting that easing off the accelerator is appropriate even before hitting the target.
Canada’s output gap - the difference between actual and potential output - would likely close sometime in the first half of 2018, suggesting that by then, inflation should be well into an uptrend, Poloz added.
Poloz added that while oil prices have fallen recently, levels between $40 to $50 per barrel are “not a big issue” for now. (Reporting by Balazs Koranyi; Editing by Himani Sarkar)