Not surprise he gets confused mixing increases of prices with “real inflation” from a central banker .
Fwiw is another central banker in Europe .
https://www.ecb.europa.eu/press/blog...965f26.en.html
“Fiscal policy, for example, can redistribute the receipts from carbon taxes to low-income households. This would reduce the loss of real incomes and help sustain household consumption.”
Fwiw it’s pretty complicated and it depends on large variables .
But usually tax increases shouldn’t be inflationary .
If tax goes up in certain sector , well people will have less money to spend in other sectors right ?
So yes , carbon tax will raises prices of oil ( it’s intentional right ?) , creating higher prices in producing goods but on the other side people should have less money to spend elsewhere , like a mortgage for example .
In aggregate it’s dubious it will be inflationary because the money supply won’t grow !
For now anyway since the carbon tax isn’t that high yet .
If governments would lower taxes and BoC lowers interest rates then yes higher carbon tax should be inflationary since the people will be able to borrow more (increasing money supply) and have more money in their pocket to spend with tax cuts .
https://www.investopedia.com/terms/f...0the%20economy.
Quote:
The increase in taxes reduces aggregate demand and consumer spending from taxpayers as a larger share of their income now goes to taxes, which leads to deflationary policies, or drag, on the economy.