Quote:
Originally Posted by Azure
If this is true, repeated interest rate increases are not the solution to combat inflation.
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That is actually a significant issue that the BoC has to grapple with. They can boost rates and it will take down demand for things like housing (which is pretty easy to understand). Does a rate increase help with energy prices that are priced globally and trade in USD? Does a rate increase help deal with supply-chain related issues that have also pushed up inflation?
This gets pretty murky. Theoretically, a rate increase decreases demand and as a result should help bring down these prices. Of course, this means the US rate increases are more of a factor though because their economy is a much larger demand driver.
As usual, making these decisions for the BoC is extremely complicated and unenviable. Despite what Pierre Polievre and his ilk would suggest, the BoC has done pretty well in my view and it's a difficult position to be in.