Finance Committee on Nov. 5th, 2025

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

That's right. The pressures on cost, on inflation, have shifted. I actually read the monetary policy report. I'm one of those. There is an interesting and intriguing chart on page 64—chart 36, “Cost pressures on goods are easing”.

Perhaps in a general manner, could you address the issue that there are still some cost pressures, but they appear to be shifting? It's not the same situation now as it was back then. Could you perhaps elaborate a bit on that, on what the current issues are that worry you most in terms of future inflation? We are now within the range. We want to keep it there. What's the big problem now?

[Tiff Macklem]

Yes, you're looking at chart 36, which is a heat map. We look at inflation through many different lenses. These heat maps are an efficient way of combining a lot of information about where the upper pressures on inflation are and where the downward pressures actually are. What you see in the heat map is that energy prices have generally come down. They've actually been subtracting from inflation. As has already come up, food prices have gone up. They're putting some upward pressure on inflation.

The main message is that we are seeing some evidence that the additional costs from U.S. tariffs, costs related to the reconfiguration of trade, are having some impact on goods prices. Goods, of course, are what largely get traded. So far, those are reasonably contained. Going forward, we think inflation will be pretty close to our 2% target. That was why we took the decision to provide some additional support to the economy.

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

Some of the pressure now on inflation and perhaps coming down the pipeline would be from import prices, from goods that we import, from inputs into our supply chain. In that respect—perhaps this is not directly linked—one issue that I think also has a big impact on inflation and on our ability to provide a predictable environment for businesses, consumers and individuals is the financial system, the stability of the financial system, but more important than that—

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Leitão. That's your time.

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

That's it?

[Voices]

Oh, oh!

[The Chair, Liberal, Karina Gould]

You got just over five minutes.

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

I will be more concise with my questions next time.

Thank you very much.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Leitão.

Mr. Garon, you have two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I was a bit surprised by one of the lines in the underlying inflation section of your report. You describe how inflation has edged down. In one bullet, you refer to past cost pressures from high global shipping costs. You cite severe weather, which had less of an impact during the period examined than during the previous period. That makes me think about extreme weather events, climate change and so forth.

More broadly, however, I'd like you to explain how the frequency of those events in a given period impacts production costs, productivity and underlying inflation. I'd like to understand how that works on a more technical level.

[Tiff Macklem]

Everywhere in the world, extreme weather events are more frequent. Take, for example, the drought conditions and bad wildfire seasons we've experienced in Canada. Those events affect prices.

Droughts affect the price of agricultural products. As a result, prices fluctuate more, which leads to inflation. We are trying to understand inflation trends. We can't control all short-term price fluctuations, but we want to keep inflation close to 2%.

That means we have work to do. Underlying inflation indicators help us with that.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I have 10 seconds left.

I may get more time later, but if not, I will thank you twice. Thank you again.

[The Chair, Liberal, Karina Gould]

That's nice, but you'll get more time later.

We now go to Mr. Lefebvre for five minutes.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Thank you, Madam Chair.

First, I want to apologize to the witnesses for missing so much of the meeting. The House was discussing budget business, and I had to be there.

Governor, you said that economists' biggest concern was better productivity and that Canadians' biggest concern was the cost of living. You said they were the same thing. You were speaking English when you gave that answer, so I'd like you to explain it in French for our fellow French speakers.

[Tiff Macklem]

For Canadians, the cost of living is their top concern, and for economists, it's productivity. They are actually the same thing. A better income means people can buy more. Higher productivity means higher wages and income. When people have more income, life is more affordable.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

The need to improve productivity in Canada, as well as in Quebec, has long been an issue.

[Tiff Macklem]

I think that's why the cost of living is a problem. Lack of productivity has been a long-standing issue.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

What would you say are the most productive countries?

[Tiff Macklem]

Our neighbour to the south really raised its productivity.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Can you give us examples other than the U.S.?

[Tiff Macklem]

To be perfectly frank, the productivity of many other countries in the world is closer to Canada's than the U.S.'s. The Americans have been very successful at raising productivity. The U.K., France and the eurozone rank very similar to Canada on productivity. We have a lot of the same problems, including a lack of investment, fewer big tech companies and extensive regulations.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Do you think artificial intelligence, or AI, could help address that problem?

[Tiff Macklem]

I hope so, but what we've seen thus far is that the U.S. economy has benefited most from the use of AI.

That's shocking when you consider that Canada is a global leader in AI.

[Éric Lefebvre, Conservative, Richmond—Arthabaska, QC]

Absolutely.

[Tiff Macklem]

As the deputy governor mentioned, we have to create companies thanks to that innovative technology.

In Canada, a lot of companies are wondering how they can use AI to increase productivity. We are most familiar with the banking and finance sector, and I can tell you that the people in that sector have put a lot of money into AI. First, they focused on improving customer service, the complaints process and regulatory compliance. In the future, they'll be using AI to increase revenues and personalize products, since those things are possible thanks to AI. However, AI does pose financial stability risks. With a higher concentration of companies, there are risks, since everyone could be using the same products and engaging in the same transactions at the same time.

That's why it is important to manage risks and maximize returns.