May 18, 2022

The Queens County Citizen

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The Bank of Canada states that inflation was different in the 1970s

The Bank of Canada states that inflation was different in the 1970s

(Montreal) Inflation has been at its highest level for many decades, but the situation is different from the 1970s, when the rise in prices was accompanied by high levels of unemployment and slow or negative economic growth, stressed the Deputy Governor of the Bank of Canada. On Thursday.

Posted 12:40 pm

In a speech to the Quebec Economists’ Association in Montreal, Tony Gravel pointed out that the strength of the economic recovery, supply chain disruptions and the Russian invasion of Ukraine together helped to drive up inflation, a “storm of factors”. .

However, Gravelle noted that the economy was “fully operational” in the second half of last year, with growth averaging over 6% on a quarterly annual basis.

From 1976 to 1982 its average was 8.0%, while the Deputy Governor also suggested an unemployment rate of 5.2%.

In the text of his speech published in Ottawa, he said, “We are far from getting back to the 1970s.”

Mr. According to Gravelle, the bank expects inflation to average around 6.0% in the first half of the year, but the reading in March came in higher than expected, which could possibly revise its expectations.

The Bank of Canada last month raised the key interest rate by half a percentage point to 1.0% to curb inflation. The central bank has also warned of further hikes.

“The economy is showing clear signs of warming and labor markets are very tight. You also have an inflationary mix of global upheaval and changes in consumer preferences,” Gravel said.

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“All this shows that at 1.0%, the key rate will stimulate more economic activity, especially if inflation is well above the upper limit of our target range. ⁇

The other difference between today and the 1970s is the Bank of Canada’s inflation-targeted agreement with the federal government, Gravelle points out. He said the monetary policy framework first adopted in 1991 had helped keep inflation and future inflation expectations low.