Lean Against or Look Through: The Bank of Canada Runs Both Inflation Rules
When inflation moves, a central bank has to decide how hard to push back. A Bank of Canada paper describes a controlled macroeconomic experiment built around exactly that decision, comparing policy rules that differ in how much they look through inflation: a Lean-Against policy with a strong response, and a Look-Through policy with a weaker one. Same economy, two temperaments — one that treats a price spike as something to fight, one that treats it as something to tolerate while the reaction works through the system elsewhere. Questions about how aggressively to respond are usually argued in prose; the point of a controlled experiment is to make the difference in response strength the variable being changed on purpose rather than the thing being disputed after the fact. The design also refuses to treat a central bank as a silent hand on the lever. Each rule is paired with communication protocols that vary how much information the bank releases about its policy response, which allows the strength of the reaction and the explanation of it to be studied separately rather than bundled together.
AI-generated discussion · Different perspectives
Notice that the paper does not pose this as look-through versus no look-through. Both rules respond to inflation; the difference is a matter of degree, which makes 'how far do you look through' a dial rather than a switch.
If that's right, the size of the response may be the less interesting coefficient. Pairing each rule with a different information protocol suggests the explanation the bank gives could do work the response itself cannot — which is a hypothesis worth testing, not a conclusion the design settles.