Inflation has been at its highest level in decades, but the situation is different from the situation in the 1970s, when rising prices were accompanied by high levels of unemployment and slow or negative economic growth, it pointed out on Thursday. of a Deputy Governor of the Bank of Canada.
In a speech given in Montreal to the Association of Quebec Economists, Toni Gravelle taught that a storm factor helped spur inflation as the strength of the economic recovery, disruption in the supply chain and Russia’s invasion of Ukraine came together to boost prices.
However, Mr. Gravelle said that the economy running at full speed as quarter-over-quarter economic growth in the second half of last year averaged 6% on an annualized basis.
The deputy governor also insisted the unemployment rate was 5.2%, while its average was at 8% from 1976 to 1982.
We are far from going back to the 1970she said in the text of his speech, published in Ottawa.
According to Mr. Gravelle, the bank expects inflation to average about 6% in the first half of the year, but with the March reading, which is higher than expected, it is likely to change its predictions.
The Bank of Canada last month raised its core interest rate by half a percentage point to 1% in a bid to help curb inflation. The central bank also warned that more increases were coming.
” The economy is showing clear signs of overheating and labor markets are very tight. You also have this inflationary mix of global upheaval and changes in consumer preferences. “
All of this shows that at 1%, the core rate stimulates economic activity, especially with inflation far above the upper limit of our target range.
The other difference between now and the 1970s is in the Bank of Canada’s agreement on inflation targeting with the federal government, Gravelle pointed out.
The monetary policy framework, first adopted in 1991, has helped keep inflation and future inflation expectations low, he said.
Source: Radio-Canada
