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Originally Posted by Slava
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.
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Why is it murky? If outside influences are a major driver with inflation, then what the BoC has done (repeated & quick interest rate increases), are not going to necessarily lower inflation.
I'm not saying their job is easy. I'm just saying that if there is any truth to this report, then the BoC is WAY to hasty with the rate increases.