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Five key facts as Bank of Canada warns on inflation

The Bank of Canada is warning that unusually low inflation pressures will persist into 2016 – a new forecast that could further delay future interest rate hikes and send the Canadian dollar lower.

"Inflation is expected to remain well below target for some time, and therefore the downside risks to inflation have grown in importance," the central bank said in a statement Wednesday.

Read more in a full story by Barrie McKenna.

Here are five key facts about inflation, when it's a boon to the economy and when it's harmful.

Deborah Baic/The Globe and Mail

Inflation

The rate at which consumer prices are rising. It’s typically measured on an annual basis, often by tracking a basket of commonly bought goods known as the consumer price index.
Chris Young for The Globe and Mail

Disinflation

A slowing in the rate of inflation over time. If the CPI rises 2 per cent in 2012 and 1 per cent in 2013, that’s disinflation. Canada, like most developed countries, has been feeling its effects for the past couple of years.
The Associated Press

Deflation

A sustained decline in overall prices, or the opposite of inflation. Central banks fear deflation because it’s often a symptom of a shrinking economy. That what happened during the Great Depression of the 1930s, making recovery more difficult and prolonged.
Adrian Wyld/The Canadian Press

Good disinflation

When intense retail price competition and more efficient ways of doing business leads to cheaper prices. That’s good for consumers, according to Bank of Canada Governor Stephen Poloz.
Nathan Denette/The Canadian Press

Bad disinflation

When people expect prices to barely rise in the future, causing consumers to delay purchases or businesses to put off hiring or raising wages.

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