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INFLATION

– MARK RENDELL

Inflation hit an 18-year high of 4.1 per cent in August, fuelled by business reopenings, supplychain disruptions and prices bouncing back from last year. Central bankers argue inflation will come down once supply chains normalize and “base year” effects dissipate. More skeptical economists point to the huge amount of fiscal and monetary stimulus during the pandemic to suggest price pressures will remain elevated for some time.

The Bank of Canada has stressed patience, saying it won’t raise rates until the job market has healed and economic output is back to normal – something it doesn’t see happening until the second half of 2022. But after five months of inflation running above its 1-per-cent to 3-per-cent target range, the bank may be rethinking its timeline for removing stimulus and raising rates.

Governments typically avoid commenting on central-bank decisions. However, the bank’s fiveyear mandate is up for renewal this year, giving the incoming government an opportunity to weigh in on the direction of monetary policy. At issue is whether to maintain the existing inflation-targeting regime or move to something like a dual mandate, which would target full employment alongside price stability, or a system that would aim for higher inflation coming out of recessions.

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2021-09-21T07:00:00.0000000Z

2021-09-21T07:00:00.0000000Z

https://globe2go.pressreader.com/article/281745567527307

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