Expectations are rising that the Bank of Canada will indeed raise interest rates this week as it considers the effect of higher energy prices on the economy.
Financial market odds for a rate hike stood at nearly 78 per cent as of Friday afternoon, according to LSEG Data & Analytics.
To be clear, when there’s real shortages, increasing interest rates could only reduce prices by killing enough economic activity to decrease the demand for the commodity in short supply. If the reduction in economic activity is significant, that would mean layoffs.
I mean that’s how interest rates decrease inflation in general, but at least the effect is stronger when there aren’t actual shortages.
Companies are laying people off without the interest rate increases, so I say bring it. If I’m gonna lose my job tomorrow, my savings may as well get a bump.
I do not envy roar making the decision here
All the models are out with the adversarial situation to the south.
We want them low to encourage investment, but need them high to combat inflation, and then real cost increases in many sectors due to the Iran and Ukraine wars aren’t solvable via inflation rate level policy. Plus we’re still in the post Covid mortgage renewal period, if you hike too high you’re putting people underwater (which IMO we shouldn’t be bailing out bad decision making based on FOMO)
Interest rates should have been a lot higher than they are even before Covid. We’re scared of breaking the economy, then along came Covid and broke the economy. The folks trying to catch a falling knife are not my concern and shouldn’t be the BoC’s.
Agree
We were in good enough shape to hike them for a long time.
