The Globe and Mail reports in its Wednesday, July 28, edition that central bankers should let inflation run temporarily above target when the economy is coming out of a severe recession, says new Bank of Canada research.
The Globe's Mark Rendell writes that the paper argues that monetary policy should allow inflation to rise above the BOC's 2-per-cent target after major recessions, in order to promote faster growth and bring disadvantaged groups back into the labour force.
The research is not an official bank position, but it supports Governor Tiff Macklem's continuing emphasis on an "inclusive" labour market recovery, which ties interest rate decisions to a broad range of employment metrics.
It also lands in the middle of a heated debate about inflation and whether the recent surge in consumer prices will be temporary or longer lasting.
The annual rate of consumer price index growth hit 3.6 per cent in May, and analysts expect June inflation to come in at about 3.4 per cent. Statistics Canada will publish the June data Wednesday. The BOC's own forecast sees inflation remaining above 3 per cent for the rest of the year, and not returning sustainably to its 2-per-cent target until 2024.
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