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Is Strict Monetary Policy Canada’s Only Inflation Cure?

However, all three experts say that people do not understand inflation in the same way that economists do. Personal value changes are some of the things we see in our daily lives. Gas is more expensive today than the last time we filled up. It’s as if different things take different size bites from hard earned money at different times in different ways, not just depreciating dollars.

“Arguments about whether inflation is a supply shock or a rise in prices for individual commodities become more attractive as monetary policy tightens, because tighter monetary policy hurts,” he said.

When the cost of everything goes up, mortgages with fluctuating rates or those that are about to expire are more expensive. Loans to small businesses are becoming increasingly scarce. Jobs are lost if consumer spending slows or falls.

While people are tempted to offer alternative solutions such as cracking down on speculators or subsidizing fuel, policy experts say the experience of the 1970s and 1980s was clear: If monetary policy was not tightened, inflation would remain high. Will remain

Based on published data from Statistics Canada, all three tracked the common measure of inflation, the year-over-year increase in the total CPI, as well as the year-over-year fraction of the CPI item increase by more than 2%. In the early 1970s through the most recent measurement in February 2022.

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