Why slowing inflation and interest rates may not mean more money in your pocket

Today we raised the policy interest rate by 100 basis points one percentage Point by front loading interest rate increases now we’re trying to avoid the need for even higher interest rates down the road we are getting closer to the end of this tightening phase uh but uh we’re not

There yet we know that if we don’t do enough now uh we’ll likely have to do even more later the Bank of Canada has raised its key lending rate 10 times in the last year and a half all in the hope of wrestling inflation to the ground and

The annual rate did just dip a bit but here’s the thing inflation going down still means prices are going up just not as fast folks often mix those up thinking that this inflation thing is going to be over and we’re going to see prices as they existed in 2019 that’s

Never going to happen they might not go up as quickly in the future as in the past uh but that’s sort of the best we can hope for so if prices are still going up how can people catch up one of the solutions for workers wage increases

That is the solution to inflation try to get a raise from your boss talk to your un try to get a better deal the next time you go to the bargaining table sounds pretty straightforward doesn’t it hey if it works I think it’s great everybody can get a paycheck a pay

Increase tomorrow and solve the inflation issue he’s being cheeky in case you miss that what’s that joke put 10 economists in a room and you’ll get 11 opinions he subscribes to the long-standing school of thought that says wage increases can actually increase in inflation in two ways one

Higher wages lead to more spending more spending means more competition for goods and that pushes prices up and two when businesses increase wages they pass that cost on to the consumer in the form of yeah you guessed it higher prices that’s the bank of Canada’s view too

This economist would know he us to work there the big concern that they have is that wages are increasing at more than 5% and actually EX accelerating so the concern there is are we seeing more of that wage pressure building up and if it continues that might prompt the Bank of

Canada to be uh considering increasing rates uh in the near future now you might be asking how would that help the average Canadian people who are under Financial pressure and are hoping for a raise but are now hearing if too many people get one interest rates might Spike which would only add more

Financial pressure enter our third economist she argues the way the bank thinks about inflation needs to change frankly wage growth is good for Canadians Central Bankers have been looking for wage growth for over a decade that’s not where the focus needs to be the need the

Focus needs to be on what are the future drivers of inflation and why do we need to think about prices differently than we have in the past several decades she says those drivers will increasingly be linked to global factors like climate change factors the bank can’t influence through interest rates now we could

Contact another seven economists But ultimately it’s his opinion that counts and so Canadians will continue to wait and worry about what Tiff mckam will decide to do with interest rates in his next update on December the 6th

The Bank of Canada’s decision to hold its interest rate steady last week means the worst of the punitive rate hikes might be over. But, as CBC’s Rob Brown explains, that may not spell immediate relief for your wallet.

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