But a period of high and volatile inflation through the 1970s and early 1980s prompted central bankers and other economists to search for a better approach. In Canada, for example, between 1974 and 1981, inflation started at 12%, dropped below 6%, then shot back up to more than 12%.
Profit margins are currently relatively wide, and the effect of a possible acceleration in compensation on price inflation would thus also depend on the extent to which competitive pressures force firms to reduce margins rather than pass on higher costs. The public's inflation expectations are another important determinant of inflation.