Bank of Canada governor Tiff Macklem says the world has become more prone to supply shocks which create more risks to inflation, but the central bank is in a better place to deal with them now that inflation is under control.
However, he said the capacity for monetary policy to stabilize output in the face of supply shocks is “somewhat limited.”
“That speaks to the role of fiscal policy, and for fiscal policy to play that role around the world, countries need to rebuild their fiscal buffers so they can play that role post-pandemic,” he said.
Macklem spoke to reporters from Washington, where he was attending International Monetary Fund meetings….