"Canada urgently needs to boost productivity to help hedge against the risk of higher inflation," Bank of Canada (BoC) Senior Deputy Governor Carolyn Rogers said on Tuesday.

Key takeaways

"Low Canadian productivity is an emergency."

"Inflation has come a long way down, we need to finish the job."

In the future, inflation may be more of a threat than it has been over the past few decades."

"Productivity is a way to inoculate the economy against inflation; an economy with low productivity can only grow so quickly before inflation sets in."

"In the wake of the pandemic, we thought productivity in Canada would improve; it hasn't happened yet."

"Productivity in Canada is hampered by lack of investment, lack of competition, inability of new Canadians to use the skills they have."

"Level of productivity in Canada's business sector is more or less unchanged from where it was seven years ago."

"More recently, we've heard from firms that say current interest rate environment is making financing more difficult."

"That said, investment levels were also weak in pre-pandemic years, when rates were much lower than today."

Market reaction

USD/CAD edged slightly higher from session lows following these comments. At the time of press, the pair was down 0.15% on the day at 1.3565.