Some Canadians are egregiously misinformed, or willfully obtuse, about what’s happening in the economic world affecting their everyday lives
REALITY: Higher interest rates are the primary policy tool to slow inflation. They have proven effective as an inflation control, both in the relatively short and long run, since the 1990s, not just in Canada but around the world. You can debate the degree to which they helped reduce Canada’s inflation rate from more than eight per cent to less than three per cent in the space of 12 months, but you’d be a fool to think they weren’t integral to the solution.
REALITY: Bank of Canada research indicates that while both are factors in our current inflation, they are not dominant ones. The bank has calculated that the carbon tax has increased the inflation rate by a mere 0.15 percentage point. The data also suggest that government spending, at current levels, is roughly neutral – it’s neither exacerbating inflation pressures nor easing them.
It’s enough to make anyone who has spent the past couple of years communicating and discussing these issues – economists, central bankers, newspaper columnists – look for a good, solid wall to bang their heads on for a while. I mean, why are we bothering?
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