Is Inflation a Threat?

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Is Inflation a Threat?

Andrew Jackson

Many conservative economists and policy-makers, not least the C. D. Howe Institute and its corporate allies, are sounding the alarm about potential inflation in the opinion pages of the Globe and Mail and the National Post.

The basic line of argument is that recovery from the pandemic caused downturn could well be much faster than anticipated, partly because many households are sitting on a lot of savings which they will spend as the economy returns to normal, and partly because the recession has reduced the capacity of the economy in some key sectors as small firms have gone out of business. The other key... factor is that high levels of public spending are supposedly threatening to over stimulate the economy.

These voices call for less monetary stimulus, especially in the form of “quantitative easing” – that is, Bank of Canada purchases of government bonds to keep interest rates low. They also call for greater fiscal restraint once the pandemic is over.

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