Central banks will stay on the alert as they guide the recovery

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The writer is governor of the Bank of Canada

Even as the global economy recovers, the pandemic continues to challenge people, businesses and governments. For central banks, charting and communicating monetary policy now requires a more delicate balance. In Canada, as in many other countries, we still need substantial monetary stimulus to recover fully, but inflation risks have increased with higher prices for many goods — driven by pandemic-induced demand shifts, supply disruptions and higher energy prices.

Despite the unprecedented nature of this crisis, we have remained guided by our framework, which is focused on a nominal inflation anchor. But in carrying out our policies, three lessons have become clear.

First, be bold on entry and plan for exit. While it takes courage to embark on exceptional policies, ending them is at least as hard. Faced with a sudden and acute crisis, it is imperative to overwhelm it and underpin confidence.

But to do…

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