MNI BRIEF: Macklem Has ‘Open Mind’ On Right BOC Inflation Goal
MNI (WASHINGTON) - The Bank of Canada is sticking to its 2% inflation target but policymakers should keep an open mind in its five-year framework review to those who argue rising cost pressures mean the goal should be higher, Governor Tiff Macklem said Monday.
“If you don't go back to your target, you don't really have a target. The target is what really has anchored the system. We've demonstrated we can get inflation all the way back to 2% -- it is 2%. We're now really focused on keeping itthere,” he said. “But we do periodically review our framework, and one of the questions people are asking is, is 2% really the right target for the future?”
Macklem said it was important to hear out arguments for why rising prices related to factors like more fragmented trade and supply chains warranted a higher inflation target. (See: MNI INTERVIEW: Big CPI Undershoot Unlikely- Ex-BOC Schembri)
“You have to think about economic security, not just simply the lowest cost solution. So those things are going to create new cost pressures. So some people are saying, well, maybe we should raise the inflation target. I will admit I'm not convinced, but I do think we have to have an open mind. We have to ask that question,” he said.