Preventing current inflation levels from becoming entrenched in the public’s expectations is a crucial strategy in ensuring that recession risks do not materialize, according to former Bank of Canada governor Stephen Poloz.

Existing trends point to private sector firms making price- and wage-setting decisions in response to mounting inflation – a development that could further push up inflation instead, Poloz said.

“The risk is [inflation] infects our economy, it gets embedded and stays there, to some degree,” Poloz said. “Of course it would never be near 100%, but it could be meaningful.”