The conversation most recently has been shifting to how long does the Bank of Canada need to hold interest rates at this level in order to get inflation all the way down to its Target of 2% it’s at 2.9% it’s getting there but the expectation is that it’s going to still
Take some time to get to that 2% Target so the governor there saying that it is too soon to talk about lowering rates at this point now the CBC Scott Peterson has been listening in to this press conference as well as well as Economist Arman ynan um Arman we’re going to come
To you in a second but I just want to start with Scott here uh what jumped out to you from what Tiff mum had to say Well it seemed to be unusually strong language usually the Bank of Canada Governor sort of you know plays both sides of the field here but he pointed
Out that he was worried about the Persistence of high inflation going to be in the neighborhood of about 3% 2.9 as you uh as you said and it was going to remain until the middle of the year and maybe it would come down to about 2% and also pointing out really the
Volatile figures here gasoline prices would be volatile High shelter costs the biggest contributor to to inflation would remain a a problem going forward and just the general Persistence of inflation as well and the plain language here is that basically the bank wants to keep rates higher uh than anticipated
Longer than anticipated and the danger is of course is if they lower it too quickly that would make people spend G which would set off potentially another cycle of inflation which would be the worst case scenario here so the the strong language as well confirmed by currency Traders out there the Canadian
Dollar up about a third of a cent after this 945 announcement at really the strength of how much they were looking at inflation and so far the the good news is the economy has avoided a recession but the bad news rates are going to be higher than longer and now
Currency Traders or I should say market makers they had originally thought that we would see an April rate reduction that doesn’t look to be the case Tiff Macklin basically said that in concrete language so more market makers are thinking now the majority that we’re going to see a June rate decrease and
That could be the beginning of a cycle of lower rates okay Scott thanks so much for breaking that down for us that was the cbc’s Scott Peterson let’s bring in Arman now Arman Yan she’s an economist and the Atkinson fellow on the future of workers Arman thanks so much for jumping
On with us my pleasure so no change today when it comes to the rate decision and not really much of a change either on on the language around uh where they’re at right now still trying to wait things out to see just how long interest rates need to stay at these
Levels in order to get to that point where they might be able to start cutting interest rates what what were your big takeaways arm mean I was actually surprised that um the Bank of Canada Governor Tiff mckam said out loud again that what what they’re really looking for is softness in wage growth
That wage growth has been in the four to five 5% annual year-over-year uh uh growth range for a while now for about 11 months and just about 2 months ago the average wage caught up with inflation and we still have a lot of collective agreements going forward that
Will be trying to catch up with what has happened in the last few years because they’re multi-year Collective agreements so the idea of that you know they’re they’ve got in their crosshairs wage softening is a problem because then later on he says explicitly to a question posed by Canadian press that
Yes the biggest contributor to inflation right now is shelter costs and guess who causes that the bank of Canada’s interest rates you know the the whole I I wouldn’t want to be a bank a central Banker right now because the typ Rope they are walking is to cool demand when
The problem has been significantly about Supply they have done nothing R Rising rates do nothing about gas prices which you pointed to food prices which are moderating but are still still way elevated over headline uh numbers nobody understands exactly why they’re taking so long to come down and then the the
Last part of it is shelter and you know they by raising rates you cool demand but you also cool Supply and that’s the issue here is there’s not enough Supply well yeah I mean and the Bank of Canada has to be looking through that in in in
Its measures to get a sense of uh what’s really happening uh when you’re not taking into consideration those those higher mortgage costs that that Canadians are are dealing with as a result of these higher interest rates so what is your sense Arman of what this
Next year or so is going to feel like for Canadians if we’re at this point where interest rates are still at 5% they’re still elevated we don’t know when they’re coming down and inflation is still elevated how do you see things playing out do you think that the
Economy is in for a a a hard Landing here is there a possibility of a soft Landing that we could avoid a recession I don’t know how to answer that because there’s so many wild cards in the mix now you know that this world is uh increasingly conflict ridden and
We haven’t seen the impact of what’s happened in the Suez Canal because of conflict and what’s happening in the Panama Canal because of climate change on Goods Transportation but we do know that prices are going to go up again like they did uh during the the pandemic
Uh Ukraine conflict period the war in Ukraine period so we know that prices are going to go up again we just don’t know when that’s going to happen and you know so I don’t know when that’s going to hit how bad that’s going to hit we consume more services than we consume
Goods yeah so it’s unclear to me that the wash outside of housing is going to make much of a difference arm mean so sorry we have to cut it short today but really appreciate you joining us that was Arman Yan an economist and the Atkinson fellow on the future of workers
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The Bank of Canada has held its key interest rate at five per cent again, saying that it’s still too soon to consider rate cuts. ‘We need to give higher interest rates more time to do their work,’ said Bank of Canada governor Tiff Macklem.
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