The Globe and Mail reports in its Thursday edition that the Bank of Canada just acknowledged that inflation is headed above its 2-per-cent target in the post-COVID-19 recovery and it appears not to have a problem with that. The Globe's David Parkinson writes that the BOC had plenty of interesting things to say in its eagerly awaited interest-rate decision and quarterly Monetary Policy Report on Wednesday. It sharply increased its near-term economic growth estimates. It reduced its government bond-buying program by 25 per cent, citing the improved state of the recovery. It now believes the economy will return to full capacity in the second half of 2022, rather than in 2023 as it had previously forecast. It talked optimistically about less scarring from the pandemic than previously feared, and about accelerated business investments in technology. The bank projected that inflation in 2023 will be 2.4 per cent, modestly yet noticeably above its formal target of 2 per cent. In a nutshell, the BOC is saying it is prepared to let inflation run warm, if not exactly hot, in the post-pandemic recovery. The arrival of 2-per-cent inflation will not necessarily trigger immediate interest-rate hikes to keep inflation on target.
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