Economists at Desjardins, who have so far been more reluctant to make bold predictions about the Bank of Canada’s decisions, launched their economic study on Wednesday in reference to the summer period: Inflation in Canada: Ahead is hot!
Indeed, financial institutions are now grouped: In light of last month’s meteoric jump in CPI, which reached its highest level since January 1991, the Bank of Canada should raise its key rate by 50 basis points on 1Verse next June after doing so for the first time in more than 20 years last week.
Normally, as in early March, increases are more moderate, at 25 basis points.
If this prediction came true, the rate would have gone from 0.25% to 1.5% in just three months.
The pressure on the portfolio of households that have taken out variable rate mortgages in the past two years will not go unnoticed. For a $400,000 home with a 20% down payment, for example, payments can go up by as little as $200 a month.
And it won’t end, because the Bank of Canada wants to gradually bring inflation down to below 3% in 2023 and to a target of 2% in 2024.
To do this, it would be necessary to make several increases in the main rate, enough to easily exceed the 1.75% rate before the pandemic. Markets, according to Bloomberg, suggest that this rate could reach 3.25% next year.
At the same time, it should be remembered that the prices of goods and services have increased by 9.2% and 4.3%, respectively, over the past year. for your budget! Especially since the purchasing power of Canadians has eroded during this time: the average hourly wage in the country has increased by only 3.4%.
Whose fault is it?
Scotiabank is not kind to the Bank of Canada, accusing it to quit lying [sa politique monétaire] Every step of the way, that’s a big part of why we get inflation numbers like this
. She said economic growth and low unemployment should have prompted the central bank to act sooner.
This financial institution now believes that there are even strong arguments
To raise the main interest rate from 75 to 100 basis points…all at once. According to her, year-on-year inflation in April could exceed 8% with the addition of used car prices in the CPI, which was unheard of since the beginning of the 1980s.
Senator and economist Clement Gignac also endorsed Economic Zone Wed An big boss
The current inflation data is the Bank of Canada, which has Too late to raise interest rates
. Thus, the probability of a recession over the next year will now rise to 35%. Needless to say, the stakes are higher
He said.
However, Central Bank Governor Tev McClem and his economists are not alone in the dock.
Disruptions in supply chains extended by politics There is no COVID
In China, fully reopening the economy, wage increases caused by labor shortages, and pressure from the conflict in Ukraine on energy and food costs contribute greatly to keeping prices at record levels.
Economic Zone: Interview with Senator and Economist Clement Gignac
