Canada may renew policy framework amid inflation worries

The Bank of  Canada was to renew its monetary policy framework on Monday,  leaving its inflation target unchanged at 2% as concern about the cost  of living rises and the COVID-19 outlook remains uncertain.

The  central bank and the finance ministry review the inflation target,  which expires at year-end, every five years. It has been set at the 2%  midpoint of a 1%-3% control range for the last 30 years.

An  announcement is due and 10 a.m. EST (1500 GMT) and the bank's governor,  Tiff Macklem, and Finance Minister Chrystia Freeland are speaking to  reporters an hour later.

Canada's  policy makers are shunning a major shift in monetary policy strategy  similar to the one adopted by the U.S. Federal Reserve last year, a  source told Reuters on Thursday.

Canada's  inflation rate matched an 18-year high of 4.7% in October, the seventh  consecutive month above the bank's 1%-3% control range. The central bank  has taken a flexible approach, allowing jobs and the economy to rebound  while supply-chain bottlenecks and rising energy prices pushed up  overall costs.

"Governor  Macklem ... was trying to tie what the bank was doing to labor market  outcomes" since the early days of the pandemic, said Andrew Kelvin,  chief Canada strategist at TD Securities, adding that introducing  language on the importance of jobs will provide "more flexibility down  the road."

The  rapid spread of the new Omicron variant of the coronavirus is clouding  the economic outlook. Canada said on Friday it has so far recorded 87  cases.

The  renewal of the monetary policy framework comes a day before the  government is due to update its economic and fiscal forecasts in a fall  economic statement.

Prime  Minister Justin Trudeau's government will outline limited new spending  in the document, a source told Reuters on Dec. 2, as inflation surges  and some business groups and opposition politicians call for restraint.

On  Wednesday, Statistics Canada will release November consumer price  figures, with an average of 11 analysts surveyed by Reuters forecasting  inflation will accelerate to 4.8%.

Macklem  will then give his final speech of the year later on Wednesday, after  the bank warned on Thursday s increasingly concerned the factors fueling  inflation, such as supply chain disruptions, could last longer than  expected that it is increasingly concerned the factors fueling  inflation, such as supply-chain disruptions, could last longer than  expected.