The Importance of Credibility in Inflation

We’re all familiar with the cycle now: Inflation is too high, so central banks keep raising interest rates. The hope is to get inflation back down to 2 per cent. But why 2? If we accept that things are going to keep getting more expensive, what difference does it make if it’s 2 or 3 per cent? Or 2.8?

Report on Business reporter Mark Rendell explains why we’re aiming for 2-per-cent inflation, whether that target will change and what he learned from a recent interview with Tiff Macklem, Governor of the Bank of Canada.

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