Bank of Canada Governor Tiff Macklem takes part in a news conference at the Bank of Canada in Ottawa on December 15, 2020. THE CANADIAN PRESS/Sean Kilpatrick

Bank of Canada Governor Tiff Macklem takes part in a news conference at the Bank of Canada in Ottawa on December 15, 2020. THE CANADIAN PRESS/Sean Kilpatrick

Most Canadians want to keep inflation-targeting regime, Bank of Canada report says

Bank opened consultations to a wider group

OTTAWA — Bank of Canada governor Tiff Macklem says different groups of Canadians experience price increases uniquely, and that the central bank will keep that in mind as it decides on a policy framework for the next five years.

For three decades, the central bank has set its interest rate target with the goal of keeping inflation at two per cent, but it reviews its inflation-management mandate every five years.

This year, the bank opened consultations to a wider group, which Macklem said provided officials with more insight into how Canadians see price increases and interest rates.

For one thing, he said, it became clear that Canadians don’t like interest rates too high or too low, and want a balance between some return on their savings and making sure the cost of borrowing isn’t too high.

Macklem said experiences with prices can vary between low-income and high-income households, and between households in urban and remote communities.

He said that feedback will work its way into the bank’s decision on whether to stick to its current inflation-targeting regime or advise the government that it should take additional factors into account.

The comfort zone the bank sets for its inflation target will help determine what happens to its key policy interest rate, which can affect the rates charged for mortgages and loans.

The last decade has seen a change for central banks with a shift to a low-interest rate environment after the 2008-2009 global financial crisis.

Central banks have also looked to unconventional tools to push money into the economy and drive down the cost of borrowing for consumers and businesses, just as the Bank of Canada has done over the past year with its bond-buying program.

“We’re probably going to be in this low interest rate environment for a considerable (period of time). It looks like a bit of a regime shift. We’re probably going to be using those tools more frequently,” Macklem said.

The summary on consultations said the majority of participants favoured having the bank keep inflation at an annual target, finding steady and predictable price increases best for their own financial planning.

There was openness to the bank aiming to hit its target over a longer period, so that despite periods of fast and slow price increases, overall inflation averages a specific amount over time.

Experts the bank has consulted and average Canadians favoured this alternative framework among others presented, but both groups worried what the ups and downs would mean for household finances, even if it meant economic stability overall.

There was an argument for the bank to help grow the job market, with support from some parliamentarians in the consultations, but the idea wasn’t seen as feasible given the bank’s current set of policy tools.

Employment is part of the bank’s policy thinking, Macklem said, adding that some Canadians want the central bank to be more explicit on the subject in its communications.

“Full employment and low, stable inflation go hand-in-hand,” Macklem said.

“If you don’t have full employment, those missing jobs, those missing incomes, are going to put downward pressure on inflation, and you’re going to get pulled down below your target.”

Inflation over the last year has remained below the central bank’s target zone, hitting a pandemic-era high of 1.1 per cent in February. But the bank’s report noted the belief from participants that prices are rising faster than the official reading of Statistics Canada’s consumer price index.

Perceptions on inflation can diverge from official statistics based on what people are buying, be it everyday goods like groceries or larger purchases like a car that may happen every few years, Macklem said.

More recently, the bank’s report notes, participants voiced concerns in particular about the rising cost of housing in cities that they felt was increasing “far beyond” the two per cent inflation target.

The price of homes doesn’t factor into inflation as directly as many people think, Macklem said, saying the measure reflects the costs to maintain a house that are smoother over time than purchase prices.

“We need to understand the different inflation experiences of different communities of Canadians,” he said.

“Part of that is being transparent, being accountable, explaining these things and explaining why we do what we do.”

This report by The Canadian Press was first published March 31, 2021.


Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Alberta vaccine rollout expanding to front-line health-care workers

More than 240,000 eligible health-care workers can begin booking vaccine appointments starting… Continue reading

File photo
The Red Deer Rebels will have three new assistant coaches when the WHL regular season starts on Friday. Brad Flynn (left), will be on the bench alongside fellow assistant Ryan Colville (right) head coach Brent Sutter (middle). (Photo by BYRON HACKETT/Advocate Staff)
Sutter steps down as Red Deer Rebels head coach

Red Deer Rebels Owner, GM and head coach Brent Sutter has stepped… Continue reading

Premier Jason Kenney announced $200 million more money that will benefit seniors living in continuing care on Wednesday. (photography by Chris Schwarz/Government of Alberta)
Alberta’s in-school rapid screening test program expanding

Alberta’s in-school rapid screening test program will expand to as many as… Continue reading

Parents and students learned Tuesday what the coming school year will look like. It's pretty much back to business as usual, said Education Minister Adriana LaGrange. School precautions include frequent cleaning, keeping students in the same groups where possible, planning the school day to allow for physical distancing and staying home when sick. (photography by Chris Schwarz/Government of Alberta)
Alberta’s largest school board says no to United Conservative draft school curriculum

CALGARY — Alberta’s largest school board says it will not use the… Continue reading

Red Deer-South MLA Jason Stephan is among those who have signed an open letter criticizing the government’s return to stricter health measures. (Advocate file photo).
Updated: Kenney tells UCP caucus COVID-19 dissent OK, breaking health rules means expulsion

15 MLAs released letter on Wednesday critical of new health restrictions

Prime Minister Justin Trudeau watches a speaker appear by videoconference during a news conference in Ottawa, Friday, April 9, 2021. Grassroots Liberals have overwhelmingly endorsed a resolution calling on the federal government to develop and implement a universal basic income — despite Prime Minister Justin Trudeau's apparent lack of enthusiasm for the idea. THE CANADIAN PRESS/Adrian Wyld
Trudeau winds up Liberal convention with election campaign-style speech

OTTAWA — Justin Trudeau wound up a three-day Liberal convention Saturday with… Continue reading

Team Canada skip Brendan Bottcher makes a shot against Italy at the Men's World Curling Championships in Calgary, Alta., Tuesday, April 6, 2021.THE CANADIAN PRESS/Jeff McIntosh
Men’s world curling championship in Calgary in COVID limbo

CALGARY — The men’s world curling championship in Calgary remained suspended Saturday… Continue reading

Pipes intended for construction of the Keystone XL pipeline are shown in Gascoyne, N.D. on Wednesday April 22, 2015. THE CANADIAN PRESS/Alex Panetta
Non-profit Quebec law centre to aid environmental group targeted by Alberta oil firm

QUEBEC — The Quebec Environmental Law Centre is coming to the aid… Continue reading

Conservative leader Erin O'Toole holds a press conference on Parliament Hill in Ottawa on Tuesday, April 6, 2020. Top Tory leaders of past and present will speak with supporters today about what a conservative economic recovery from COVID-19 could look like. THE CANADIAN PRESS/Sean Kilpatrick
Conservatives cite empathy, relationships as ways to help expand their movement

OTTAWA — Conservatives should show empathy with Black residents who say they’ve… Continue reading

NDP Leader John Horgan celebrates his election win in the British Columbia provincial election in downtown Vancouver, B.C., Saturday, Oct. 24, 2020. New Democrats are reconvening for the second day of a three-day policy convention as they look to push past the glitches of the virtual event's opening sessions and rally around keynote speaker John Horgan. THE CANADIAN PRESS/Jonathan Hayward
New Democrats reconvene as hiccups, frustrations plague national policy convention

OTTAWA — New Democrats reconvened Saturday for the second day of a… Continue reading

FILE - In this Monday, Oct. 23, 2017 file photo, President Donald Trump speaks during a joint statement with Singapore's Prime Minister Lee Hsien Loong in the Rose Garden of the White House in Washington. Former President Donald Trump plans to affirm his commitment to the Republican Party — and raise the possibility that someone else will be the GOP's next presidential nominee — in a closed-door speech to donors Saturday night, April 10, 2021. (AP Photo/Evan Vucci, File)
Trump in 2024? He says only that ‘a Republican’ will win

PALM BEACH, Fla. — Former President Donald Trump plans to affirm his… Continue reading

A cruise ship sits docked waiting for passengers to be evacuated in Kingstown, on the eastern Caribbean island of St. Vincent, Friday, April 9, 2021 due to the eruption of La Soufriere volcano. (AP Photo/Orvil Samuel)
Ash-covered St. Vincent braces for more volcanic eruptions

KINGSTOWN, St. Vincent — People who ignored an initial warning to evacuate… Continue reading

Owner of 4 Point Taekwondo Kevin Mejia holds a board as organizer and martial artist Kevin Olsen breaks it in Edmonton on Friday, April 9, 2021. One hundred martial artists from around the world, will be breaking a board for an event called "Break for a Breakthrough." The idea is for martial artists to unite and re-engage with the arts because they may have drifted away or lost enthusiasm as a result of the pandemic. THE CANADIAN PRESS/Jason Franson
Break for a Breakthrough: Canadian hosts international martial arts demonstration

EDMONTON — Whether he’s breaking a wooden board, a clay tile, cement… Continue reading

Most Read