ICYMI: Brace for more big hikes because Bank of Canada is far from finished — via financialpost Canada Economy inflation
It’s hard to criticize the Bank of Canada governor for failing to foresee a war in Europe. But that’s what happened, and now he must contend with an emergency stimulus program that worked so well that little of the scarring that typically occurs during a recession happened this time.Article content
The Bank of Canada emphasized it is far from finished. Its new forecast discovered the economy is probably now operating at a level that exceeds estimates of what it can produce without stoking inflation. And yet the benchmark rate is still below its pre-pandemic level. Policy-makers said they are worried households and businesses will absorb current inflation as the new normal. The Bank of Canada is relying on its credibility with the public to keep expectations anchored.Article content
The Bank of Canada updated its estimate of the neutral rate to a range of two per cent to three per cent. There is some distance to travel to get to the lower end of that range, and Macklem acknowledged it’s possible he will have to push the benchmark rate above the high end to bring inflation under control.
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