MNI BRIEF: BOC Defends 2% Target, Senate Asks About Raising It

Bank of Canada Governor Tiff Macklem on Thursday gave one of his most detailed defenses yet in favor of keeping a 2% inflation target while being questioned about a higher goal during a Senate hearing.

“We’ve had two [percent] for 30 years, I think it’s proven to be very successful,” Macklem said. Companies are more likely to push through price increases when inflation is higher, as is the case today, Macklem said, and prices tend to be more volatile when price gains are larger.

“You want a low number,” he said. “You want a number that’s low enough that from one year to the next they don’t really notice.” While Canada's senators are unelected they have ties to elected governments that have as Macklem noted renewed the 2% target dating back to the 1990s. (MNI INTERVIEW: Era of Shortages To Force Rates Up - Bill White)