The Bank of Canada seems in panic mode by hiking the policy rate a full percentage point. Though the central bank has the mandate to keep inflation at target, however the bank does not have full capacity to control all components in the inflation calculation. In the current situation, fuel price increases are one of the major contribution but the bank has almost no influence in crude prices. I think the bank should explicitly ask government or other institutions for help in controlling inflation in certain components. The economy is not doing as good as the economic indicators are telling. I think we are experiencing a recession in productivity, a phenomenon that Greenspan often said back to his time but became more obvious at the post COVID time. People have jobs but they are not as productive compared pre-pandemic.
Categories