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No reason to worry about deflating prices yet, says BC finance minister

Finance Minister Mike de Jong said he's comfortable with the fact prices in British Columbia are on the verge of deflation.

"I don't lose a ton of sleep around the fact inflation is kind of stagnant at the moment, even into a very minor minus point one," de Jong told The Tyee last week. "The economists talk about how a very small amount of inflation can be good for the economy."

Statistics Canada reported Feb. 21 that for the second month in a row, B.C. had no year-over-year increase in its Consumer Price Index, giving it the lowest inflation rate among the provinces. The average CPI increase in Canada was 1.5 per cent for the year.

The release came in a week when the managing director of the International Monetary Fund, Christine Lagarde, warned that deflation in rich countries could derail the global economic recovery.

"With inflation running below many central banks' targets, we see rising risks of deflation, which could prove disastrous for the recovery," The Financial Times quoted her saying, warning that deflation could lead to the kind of falling prices that have hampered Japan's economy for two decades.

"The governor of the bank of Canada when we spoke talked about inflation in the range of one, one and a half per cent being optimum," de Jong said. "We're a little below that right now."

The lack of inflation means the cost of living in B.C. isn't going up, he said. "At the same time, when I go into the grocery store I don't look at the price of groceries and say, 'Oh my god, have they ever fallen dramatically.' They're where they are and lots of families are still facing challenges around that."

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria. Find him on Twitter or reach him here.

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