Lower economic growth necessary to bring inflation down: BoC senior deputy governor BoC
The Thursday speech to Calgary Economic Development came one day after the Bank of Canada raised its key interest rate by three-quarters of a percentage point and indicated higher interest rates are on the way.Sign up to receive daily headline news from the Calgary Herald, a division of Postmedia Network Inc.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc.
Central banks tend to worry when people and businesses expect inflation to remain high because it can lead to a self-fulfilling prophecy. Businesses that expect high inflation will set future prices higher while workers will negotiate future wage increases to match up with their expectations of inflation.
“We think there is room in the economy to cool it and stay in positive growth territory,” Rogers said.Article content “Workers are looking at the rate of inflation and what it’s doing to their purchasing power, their budgets, and they’re looking at the same tight labour markets and they’re thinking, you know, I need a raise. This is also completely understandable,” said Rogers.This advertisement has not loaded yet, but your article continues below.
The senior deputy governor said the bank will continue to monitor how the economy is responding to higher interest rates as well as global economic developments and assess how much higher interest rates need to go.Article content Rogers warned that the bank’s decisions now and in recent months will take up to two years to have their full effect on inflation.
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