Rate hikes aren't the cure for high inflation: Economist
BNN Bloomberg
Scotiabank’s Derek Holt is standing by his call for eight interest rate hikes before the end of 2023, arguing that borrowing costs need to be adjusted in order to combat inflation. One noted economist, however, said rate hikes won’t curb consumer price appreciation.
In the wake of the Bank of Canada’s most recent policy meeting, Scotiabank’s Derek Holt is standing by his call for eight interest rate hikes before the end of 2023, arguing that borrowing costs need to be adjusted in order to combat inflation. One noted economist, however, said rate hikes won’t curb consumer price appreciation.
“Definitely in 2022 I think we’re going to see several rate hikes,” said Holt, Scotiabank's head of capital markets economics, in an interview.
“We had forecast four rate hikes in the second half of next year starting in July, and we’re contemplating the risk of bringing that forward. I think it’s very feasible that those rate hikes ring in the New Year, if not January, then at a minimum next spring or thereabouts.”
Holt said Canadian households have some time to prepare, suggesting early moves from BoC Governor Tiff Macklem will be gradual and measured, but concluded the era of “ultra cheap” financing rates is drawing to a close.
At the Canadian central bank’s meeting Wednesday, Macklem brought an end to the BoC’s quantitative easing program, while also hinting at “the middle quarters of 2022” as a possible timeline for its first post-pandemic interest rate hike.
The Canadian dollar soared in response to the bank’s messaging, which Holt said will go a long way toward helping the Bank of Canada.
