National Bank Says Bank of Canada and Its Inflation Measures Are A "Relationship on The Rocks"

07:59 AM EST, 11/07/2025 (MT Newswires) -- Deputy Governor Rhys Mendes recently admitted the Bank of Canada may have misled markets by overemphasizing CPI-median and CPI-trim as "preferred" core inflation measures, said National Bank of Canada.

The BoC has shown a lack of consistency in its use of core indicators over the past five years, noted the bank. It appears that the BoC has alternated between different measures to support policy decisions already in motion-highlighting the broader communication challenges these frequent reversals have created.

As acknowledged by Deputy Governor Mendes, the renewal of the inflation targeting regime in 2026 is the ideal moment to assess the framework regarding core inflation, stated National Bank.

This is a crucial exercise that the BoC must not take lightly in order to stabilize its communication for years to come, according to the bank.

In National Bank's view, to restore clarity and confidence, the BoC should commit to a simple exclusion measure as most central banks do, accompanied by diffusion indices, and stick with this framework in the years ahead.

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