“It could be more persistent”, according to an economist

As central banks repeat that the inflation surge of recent months is temporary, former Bank of Canada No. 2 Carolyn Wilkins warns that some price hikes could last over time.

Carolyn Wilkins was the country's first deputy governor of the central bank from 2014 to 2020.

© / Radio-Canada
Carolyn Wilkins was the country’s first deputy governor of the central bank from 2014 to 2020.

When you look at the numbers closely, she explained to Economy zone Thursday evening, we can see that there are temporary effects.»

She cites as an example the rising gasoline pricesWhich were in fact restored after falling at the start of the pandemic, which can give the false impression of a sharp rise in inflation.

Nevertheless, according to Carolyn Wilkins, there is a small part that is maybe a little more disturbing», Or the cost increases generated by stoppers in supply chains».

Economist Carolyn Wilkins is now an external member of the Bank of England’s Financial Policy Committee. She was seen as the favorite to succeed Stephen Poloz, who left the Bank of Canada in 2020. Former Canada Finance Minister Bill Morneau chose Tiff MacLem to head the central bank for a seven-year term.

Look “beyond COVID-19”

The economic recovery, which coincides with the threat of the Delta variant, is a pivotal moment for central banks.

However, the President of the United States Federal Reserve (Fed) Jerome Powell indicated on Friday morning – as part of his speech at the Jackson Hole annual meeting bringing together (virtually this year) the world’s central bankers – that the Delta variant represented a short-term risk to the economy.

He hinted that the Fed may soon start scaling back its intervention in markets as the institution buys $ 120 billion worth of U.S. Treasuries and other securities each month.

He did not give a timetable, but argued that it would not be appropriate to react in the rush to inflation. Several economists estimate that the central bank will wait until 2023 before starting a rate hike.

Making monetary policy is not about responding to what happens today, Carolyn Wilkins told Thursday at Economy zone. This is what will happen in a year, in 18 months, because it takes so long for monetary policy to have its effects.»

She adds that central banks are starting to look beyond [de la COVID-19] and further on the horizon to see the real challenges we face, whether it is inequalities, the climate or the digitization of the economy».

All of these long-term issues are very important. But, at the same time, I’m sure central banks are keeping an eye on the current situation as well.»

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