Deflation Won't Solve Affordability, Bank of Canada
The Bank of Canada recently addressed concerns regarding the affordability crisis in the country, emphasizing that deflation is not the answer. While inflation has decreased to around the target range of 1-3%, the central bank highlighted that persistent challenges such as high housing prices, rising service costs, and wages that are not keeping pace with living costs continue to create affordability issues for many Canadians.
The bank’s officials noted that although deflation might sound like an attractive solution, it could potentially harm the economy by discouraging investment, increasing unemployment, and reducing business revenues. As a result, the Bank of Canada is focused on maintaining price stability and using monetary policy tools to ensure inflation remains under control.
The central bank called for broader economic reforms to address structural issues like housing availability and labor market conditions, which are at the core of the affordability challenges. Despite inflation falling to lower levels, the affordability crisis remains a pressing issue, and the bank is working to balance inflation control with fostering a stable economic environment.
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