Allowing a period of price declines would be ‘painful’ for Canadians: BoC official
Written by The Canadian Press on November 26, 2024
OTTAWA — Bank of Canada deputy governor Rhys Mendes says allowing for a period of price declines may sound tempting, but it would ultimately be more painful for Canadians.
Mendes made the comments in a speech today in Charlottetown on the importance of keeping inflation at the two per cent target.
His speech comes as the Bank of Canada declares victory on high inflation, but Canadians remain dissatisfied with higher prices across the economy.
The deputy governor says the central bank would have to exert more pain on the economy with high interest rates to bring down prices, an outcome that would likely leave most people feeling worse off.
He says bringing a period of lower prices would also affect people’s expectations for inflation, which would make it harder for the central bank to stimulate spending in the case of an economic downturn.
Mendes also warned that a period of low prices could trigger a deflationary cycle that would be difficult to escape.
This report by The Canadian Press was first published Nov. 26, 2024.
The Canadian Press