Does it make sense to raise the inflation target?

The Bank of Canada is unlikely to take any action at the upcoming policy meeting this Wednesday. The 1.6% annualised decline in second-quarter GDP was worse than the 1.0% fall the Bank assumed in its July Monetary Policy Report. But Statistics Canada indicated that the disruption caused by the Alberta wildfires in May accounted for all of that decline. Admittedly, even without that disruption the economy barely expanded, principally because of a sharp drop back in non-energy exports and continuing weakness in investment linked to the slump in energy prices last year. Nevertheless, that second-quarter weakness followed a very strong 2.5% annualised gain in first-quarter GDP, so it won’t prompt the Bank into any knee-jerk reaction.