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Or sign-in if you have an account.The insouciance with which the Bank of Canada has treated its ongoing failure to achieve its inflation target is remarkable. Photo by James Park/BloombergAffordability has become the No. 1 concern of Canadian households. A major contributor to their anxiety has been inflation consistently exceeding the Bank of Canada’s two per cent target, including a 3.2 per cent increase in the Consumer Price Index in May. Since 2020 the CPI has risen by 26.9 per cent, well above the 15 per cent it would have risen if the Bank of Canada had achieved its goal, as shown in the graph below. Prices jumped eight per cent in 2021 alone and have remained above the Bank of Canada’s target ever since.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorThe bank appears unperturbed about inflation overshooting its target. It was essentially self-congratulatory about almost returning inflation to its target rate in early 2026, highlighting in its January 2026 Monetary Policy Report that “CPI inflation remains near the two per cent target.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe report added that “measures of core inflation that exclude volatile components, including food, continue to ease” and “most cost indicators are now rising at a pace broadly consistent with inflation around two per cent.” Its benign outlook for inflation was partly because “oil prices are assumed to be lower” — an assumption almost immediately blown up when they jumped after the onset of war in Iran. The prospect of their remaining high for an extended period promises another year of above-target inflation resulting from both the direct impact on gasoline and home heating oil and the indirect impact over time from rising input costs for everything from air transport to food.The insouciance with which the bank has treated its ongoing failure to achieve its inflation target is remarkable. In her famous “breaking-the-glass” speech in March 2024, former deputy governor Carolyn Rogers attributed the stagnation of real incomes in Canada to faltering productivity but ignored the contribution of inflation exceeding its target rate. The bank itself dismisses these repeated overshoots of inflation as the result of a series of unfortunate one-off events, including wars in Ukraine and the Middle East and the disruption of supply chains from the COVID pandemic.Higher prices for goods and services most people must buy, including food, housing, health care and gasoline, have been especially painful. Since 2021, the cost of these essential items has risen 39.8 per cent. In the first quarter of this year, households allocated 47 per cent of their spending to these essential items, almost three percentage points more than before the pandemic. Their rising cost means less money is left over for discretionary spending on durable goods, entertainment, travel and restaurants.It would be a refreshing display of candour and a reaffirmation of the bank’s commitment to the two per cent inflation target if it openly acknowledged its failure to control inflation. In Kevin Warsh’s first press conference, the new chair of the U.S. Federal Reserve Board admitted the Fed’s failure to meet its inflation target, saying, “We’ve missed for five years, and we’re going to fix that.” Whether Warsh backs up his words with actions is not yet clear, however, since the Fed still doesn’t project inflation returning to its two per cent target until 2028, implying an overshoot lasting seven years.Watching inflation exceeding its targets in both Canada and the U.S. year after year, it is hard not to agree with Mohamed El-Erian, former head of PIMCO and now president of Queen’s College, Cambridge, who says central banks have unofficially decided to raise their inflation target to help governments reduce the burden of huge debts assumed during COVID. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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