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Economic Viewpoint

Are There Other Ways to Lower Inflation besides Continuing to Raise Interest Rates?

July 13, 2023
Hendrix Vachon
Principal Economist

With many central banks still signalling possible further rate hikes, we keep getting asked if there are other ways to combat inflation. The short answer: yes. Governments could curb demand to help bring down inflation by adjusting their spending or tax policy. But they couldn’t easily take over the whole job of the central banks, which enjoy a high degree of independence specifically so that they can focus on inflation. Plus, with their ability to adjust interest rates, central banks have a powerful tool for influencing demand and inflation. The role of governments could above all be a complementary one. Their interventions could also help make the fight against inflation more equitable for society.