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Stephen Poloz May Let Inflation Creep Higher

Posted May 13, 2015

Under Economic Issues, International Trade Issues

(Don Pittis – CBC News)

Which would you prefer, higher interest rates or higher inflation?

If you are someone who actually watches what the Bank of Canada does month to month, its 2% inflation target may seem sacrosanct. In which case, you might be surprised to hear that the concept of raising or lowering interest rates to freeze inflation at exactly 2% is a relatively recent innovation. It was put in place in reaction to the soaring prices and wages of the 1970s and 1980s. 

And the Bank of Canada has been seriously considering changing that target. Any change would still require a new agreement between the federal government and the bank. The current agreement is scheduled to end next year.

A fresh report from the business news service Bloomberg implies that the bank could surprise us with just such an announcement any time soon. Click here to read more.