A deputy governor of the Bank of Canada warned on Thursday that the central bank may need to raise its core interest rate to 3.0% or more to ensure inflation does not last.
In the text of a speech to the Gatineau Chamber of Commerce on Thursday, Paul Beaudry said the possibility of further rising consumer prices means the central bank may need to push its core rate to at least the upper end. of his fork. neutralwhich is estimated to be between 2.0% and 3.0%, where it does not stimulate or hinder growth.
The Bank of Canada raised its key rate by half a percentage point for the second consecutive time on Wednesday, taking it from 1% to 1.5%.
According to Beaudry, supply chain disruptions during the pandemic lasted longer than expected, exacerbated by unexpected events such as Russia’s invasion of Ukraine and lockouts on China to protect against COVID – 19, which forced the bank to react quickly to stop the price spike.
Beaudry noted that some Canadians believe inflation is eating into itself, driven by expectations of more expensive goods as wages rise to meet rising prices, but he insists that higher rates higher interest rates will balance supply and demand and alleviate inflationary pressures.
Annual inflation hit 6.8% in April, posting the fastest year-on-year increase in 31 years, as prices of commodities, from gas to food, continued to rise.
Source: Radio-Canada
