The US Federal Reserve made the Great Depression worse, allowing the money supply to contract by 30 percent from 1930 to 1933. [...] Like many other central banks, the Bank of Canada allowed inflation to spiral out of control in the 1970s in the wake of the 1973 oil price shock. [...] Policymakers were concerned that, without explicit targets, shocks like the Gulf War (1990-1) and the introduction of the GST on New Year’s Day 1991 would lead to a repeat of the 1970s. [...] But has success in fighting inflation come at the sacrifice of employment or economic growth? Using standard deviations to measure volatility or uncertainty, and excluding the COVID period because of its wild early data swings, the answer is no, in both cases. [...] If the Bank were to raise the target to three because getting back to two percent was hard, that would lead to expectations it might change the target again next time inflation overshot it.
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