May 24, 2023
Scotiabank economist Derek Holt said the central bank is in a “race against the clock” with high prices. “If the BoC doesn’t adopt the crush it, killer mentality, then it may never succeed in getting inflation down to two per cent,” he said in a note to clients on May 17.
Statistics Canada reported on May 16 that the April consumer price index (CPI) accelerated 4.4 per cent from a year ago, a faster pace than the 4.1 per cent expected by economists.
The Bank of Canada has raised its benchmark rate to 4.5 per cent from 0.5 per cent over the past year in a bid to bring inflation that surged to a four-decade high back to earth.
Holt, known on Bay Street as a vocal critic of the central bank’s decision to not move rates sooner last year, said there are a few pressing arguments to be made in favour of Bank of Canada governor Tiff Macklem raising rates at the June 7 meeting. Among them is the bogeyman of inflation expectations.
The longer higher inflation continues, the more it will erode consumer and business confidence in the Bank of Canada’s ability to achieve its two-per-cent target, he said.
