The accelerating inflation hitting North America increases the risks of a recession here.
• Read also: Interest Rates: Towards a Big Rise in Canada?
• Read also: Quebec limits school tax hikes
While the US central bank raised key interest rates by three-quarters of a point (the largest increase since 1994) in order to combat inflation, its Canadian counterpart could follow suit.
What this shows is that we’re hitting the brakes, and the economy is overheating. “If we raise interest rates too quickly, the economy will react,” said Robert Aslin, vice president of public policy at the Canadian Business Council.
To better understand the situation, the expert compares inflation to cancer, because “if you let it spread throughout your body, it will be more and more difficult to remove.”
“If inflation becomes entrenched, that’s the risk, companies raise wages, raise prices, and it’s very difficult to get back to their level after that,” explained M. Aslin.
The intervention of the central banks which, by raising key rates, seek to bring prices back to their usual level, is a swing of the pendulum, with the aim of avoiding making taxpayers whose purchasing power has not increased their salaries.
“However, it may be painful, cause a recession, and then in a recession we will still have to stimulate the economy,” he added.
Watch the full interview with Robert Aslin in the video above.
“Subtly charming problem solver. Extreme tv enthusiast. Web scholar. Evil beer expert. Music nerd. Food junkie.”