Friday, July 17, 2009

Has the government used other methods to try to control inflation?

In 1975, the government of Prime Minister Pierre Trudeau set up the Anti-inflation Board (AIB) in its efforts to combat inflation. The government introduced wage and price controls, which were administered by the AIB. It was the first time that the government used wage and price controls in peacetime.

The wage and price controls applied to the public sector and to private companies with 500 or more employees. Wage increases were capped at 10 per cent in the first year of the anti-inflation program, eight per cent in the second year, and six per cent in the third year. The program was very good at keeping a lid on wage increases. But by the early 1980s, inflation had hit 12.5 per cent.

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