The policy consensus that has guided economic decision-making for decades is being challenged like never before. In a new series, the Financial Post explores the opportunities and unknown costs of the Great Rethink.
Whether you know it or not, one of the most important numbers in your life is two, as in two per cent.
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Two per cent is the rate of annual inflation that one of the country’s most powerful institutions, the Bank of Canada, uses to guide its decisions. As far as the central bank is concerned, the economy works best when the cost of the food you eat, the clothes you wear and the rent you pay increase at a pace of about two per cent every year.
The cost of your commute, the booze you drink, the pot you smoke: yes, two per cent. Maybe the price of gasoline spikes five per cent, while potatoes are up by only 1.5 per cent. But the Bank of Canada will tolerate those sorts of product-specific rises and falls, as long as Statistics Canada’s Consumer Price Index, which combines the cost of about 700 goods and services, settles at an increase of two per cent compared with a year earlier.