The Hill Times
The absolute adverse effect of inflation is that it wipes out real earnings, reducing purchasing power for all Canadians. This is bad. Maybe more sinister than that is the relative effect. Inflation distorts relative income and expenditure between individuals. Inflation is measured as the average increase in consumer prices. However, individual prices increase with different rates. This imbalance changes the relationship between income and expenditure.
When the aftermath of the pandemic broke the upper band towards two-digit figures, the anxiety rose to panic levels. The 2008 financial crisis proved that the bank’s inflation-targeting policy was not tailored only for good times with no inflationary or deflationary pressures. Now that the runoff inflation is mostly under control, once again the policy comes out as a success. I do not think that there needs to be any further changes in terms of the inflation targeting policy.
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