COVID-19 is proving to be a harsh litmus test of inflation targeting, according to a central bank official
A significant proportion of Canadians believe that official inflation figures do not accurately show the actual burden of the rising costs they are struggling against, according to a senior official of the central bank.
Lawrence Schembri, deputy governor at the Bank of Canada, said that this “perception gap” will likely have an influence on bank policy, which targeted annual inflation at 2% for around three decades now.
Schembri said that the COVID-19 pandemic is proving to be the ultimate test of the “well-anchored expectations” that targeted inflation has traditionally set.
“It's more than just a number. Achieving our [inflation] target on a continuing basis contributes to rising standards of living for all Canadians,” Schembri said, as quoted by BNN Bloomberg. “When people and businesses feel confident that they know what the rate of inflation will be, they can make better long-range plans for their careers, their savings and their investments.”
The BoC is currently reviewing its inflation target prior to the renewal of its agreement with the federal government on the monetary policy framework in 2021.
Earlier this week, the central bank launched its “Let’s Talk Inflation” public consultation to take stock of Canadians’ preferences regarding its policy.
Scheduled to run until Oct. 1, the 10-minute online poll will gather public perceptions on inflation and other approaches “that central banks can use to support price stability and a strong economy.”
“The Bank is committed to accountability and transparency in everything we do. The actions we take and how well we do our work affects the lives of each and every Canadian. Good planning starts with good listening – and we want to hear from you,” said BoC Governor Tiff Macklem. “I hope you take this opportunity to let us know how changes in the economy are being felt in your life and in your communities. Tell us what matters to you.”
