Soaring food prices, surging jobs could put pressure on Bank of Canada to return to rate hikes
CBC
Public outrage over a continued rise in grocery prices this week and the prospect of a strong jobs report may be signs that the Bank of Canada has not yet finished hiking interest rates.
Speaking to the Manitoba Chambers of Commerce on Thursday in her hometown of Winnipeg, with her parents and her sister in the audience, the Bank of Canada's senior deputy governor, Carolyn Rogers, implied that despite the bank's pause this week, there may be higher interest rates ahead.
"We can all agree, inflation is still too high," Rogers told the business audience. "It's come down a bit, but at 5.9 per cent, we have a long way to go to get back to the two per cent target."
While the deputy governor held to the recent Bank of Canada forecast that the inflation rate would hit three per cent this year and be right on target at two per cent by 2024, some of those listening to her speech sensed she was hinting those goals were optimistic if interest rates don't rise further.
"It looks like the central bank's pause is on shaky ground and it wouldn't take all that much additional evidence to spur them back into action," Desjardins economist Royce Mendes said in a note a few minutes after Rogers spoke.
Addressing the difficulty of battling inflation in the face of a still-strong jobs market where wages are outpacing productivity — with the danger of imported inflation from our biggest trading partners and on the prospect that energy prices could yet rise again — Rogers repeated the bank's view that this week's pause in its key interest rate depends on how the economy unfolds.
In a single phrase, she addressed the predicament facing the central bank, where fighting the rising price of things like groceries only added to interest costs for Canadian borrowers — offering the bank an unpalatable choice between two painful options.
"We know that adjusting to higher interest rates has been hard for many Canadians," Rogers told the Winnipeg audience, twice breaking into French, a language she's learning. "We also know that many Canadians are asking how exactly making their mortgages more expensive while they are still dealing with higher grocery bills will eventually lower inflation and make their lives easier."
Her answer to that rhetorical question may not be satisfying to those trapped between a plague of rising prices and the cure.
Rogers offered a plain-spoken description of how inflation had turned from a global to a domestic phenomenon caused by a pandemic and what she called Russia's "senseless war" on Ukraine.
"This perfect storm of factors was showing up in Canadian grocery stores by the middle of last year," she said.
The problem is that as a storm of protests over grocery prices this week has reminded politicians, even as the global prices of energy, grain and shipping have declined, Canadian prices of many essential consumer staples have continued to rise at rates above 10 per cent a year — far above wage increases, which remain below inflation.
With everyone, including grocery store executives and their suppliers, denying they are responsible, it may be that the macroeconomic — that is, the economy-wide — impact of higher interest rates is the only solution to the problem.
Another sign that inflation is now increasingly down to domestic causes, Rogers said, is a tight labour market where workers are trying to catch up to inflation, while employers, anxious to fill jobs in a still-strong economy, are willing to pay.
P.E.I.'s Public Schools Branch is looking for 50 substitute bus drivers, and it'll be recruiting at three job fairs on Saturday, June 8. The job fairs are located at the Atlantic Superstore in Montague, Royalty Crossing in Charlottetown, and the bus parking lot of Three Oaks Senior High in Summerside. All three run from 9 a.m. until noon. Dave Gillis, the director of transportation and risk management for the Public Schools Branch, said the number of substitute drivers they're hiring isn't unusual. "We are always looking for more. Our drivers tend to have an older demographic," he said.