Moreover, the growth of monetary aggregates, measuring everything from cash to bank deposits to Canada Savings bonds, has slowed considerably in recent months. Over the last few decades, money has fallen out of favour with central banks as an indicator of future inflation. But, as weargued, it is a better predictor of future inflation when inflation is unsettled – as it is now. This slowing of money growth will likely damp inflation further down the road.
Finally, the arithmetic: The Bank’s target is year-over-year inflation, which largely reflects price increases that happened six months or more ago. Even if all consumer prices levelled off completely starting this month, headline inflation would remain above target until well into next year. The Bank’s monetary policy framework is designed to be forward-looking , which means it must look past year-over-year inflation numbers, analyzing what month-over-month numbers are saying as well.
The Bank has come down on the side of significant front-end loading of interest rate increases, and the announcement that accompanied last week’s rate hike suggests more increases are to come. One reason the Bank has avoided even larger hikes is that getting inflation back to target is an inexact science. It is prudent to see how the economy reacts to what has been a significant change in rates over a short time.
The announcement discusses the many reasons why the Bank tightened as much as it did, but to us one rationale stands out — inflation expectations. In July’s Monetary Policy Report the Bank estimated inflation would return to the top end of the target range by the end of 2023 and return to target by the end of 2024, or in roughly two years.
Steve Ambler, a professor of economics at the Université du Québec à Montréal, is the David Dodge Chair in Monetary Policy at the C.D. Howe Institute, where Jeremy Kronick is director, monetary and financial services research.
CDHoweInstitute They need to stop going up! When people renew they will be facing dire financial situations.
Till they reign in inflation. Which means triggering a recession. Which should result in a new government.
CDHoweInstitute How 'bout we leave that to the finnancial experts vs askingthe masses?
CDHoweInstitute Theses poppets at the bank of Canada need to fire !!
Pretty much peaked out now tbh