There’s been a lot of talk about Mark Carney’s work keeping Canada’s economy on track, and his role in the regulation of the global financial system, but how did he do on Job 1 of a Canadian central banker?
The Bank of Canada has a target to keep inflation in a band of 1 per cent to 3 per cent per year, as measured by the consumer price index. If inflation starts to fall toward the bottom of that band, monetary policy is too tight. If it’s out the top end, policy is too loose.
On that measure, Mr. Carney did just fine. Over the months since he stepped into the job, which were among the most tumultuous of any central banker in recent decades, CPI had an average annual increase of 1.85 per cent.
Back out the first year of CPI increases, to account for the notion of monetary policy lag that says that it takes rate moves about six months to as much as two years to fully affect the economy, and CPI increases averaged 1.71 per cent so far in his term.
At least on that score, it suggests Mr. Carney’s policy of keeping rates lower for longer was the right call.