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With the text below help answer the following question: Discuss the inflation goals of BOC (Bank of Canada) and possible reasons for setting these goals.
With the text below help answer the following question: Discuss the inflation goals of BOC (Bank of Canada) and possible reasons for setting these goals. The benefits of being near the inflation target Canadians know inflation is too high right now. But many may wonder why the Bank's goal is to get inflation back to 2%. Inflation is mostly influenced by the costs that go into what firms produce and sell. When inflation is high, firms tend to raise their prices more frequently. Consumers, in turn, expect higher prices and stop shopping around for the best deal. But when a central bank has a credible record of achieving low and stable inflation, firms tend to absorb day-to-day changes in their costs rather than pass them on to consumers. This is because they believe inflation will stay close to the central bank's target. So, when inflation is near the target it tends to remain there, and prices are more stable. That helps the economy function better. Returning to the 2% inflation target will bring back the stability Canada has known for the past 30 years, to the benefit of all Canadians." Check out our explainer "Understanding inflation targeting." The dangers of
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