Quote:
Originally Posted by Zarley
Unfortunately it took an inflation crises driven by bad central bank behaviour to get us to this point, but ultimately it's a good thing if rates stabilize at 2.5%-3% to wean our economy off of cheap debt. It's going to mean a world of hurt for housing in Vancouver and the GTA though.
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I don't think there was any real issue with the Bank of Canada increasing the money supply in 2020 through purchasing government bonds. It was important to provide liquidity and in that type of scenario (where it's essentially a one-time thing), it's not a given that it will lead to any kind of inflation. For instance, Canada's M2 increased by almost 15% in 2008 (vs. 18.5% in 2020), yet inflation was well below the target range in the next couple of years.
They should have started raising rates sooner, as soon as inflation was ticking up. But ultimately I don't think that would have made a significant difference outside of real estate.