Bank of Canada: domestic consumer demand is driving up prices
We let you know last week about Canada increasing its benchmark interest rate by a full percentage point and the potential impact that could have on farmers.
The Bank of Canada says that while the in war in Ukraine and global disruptions are to blame, domestic consumer demand has also been driving prices up. However, the governor of the bank says that exports should stay strong enough to cushion the country’s economy and increased domestic borrowing costs should calm down demand.
According to Tiff Macklem, “Higher interest rates will help slow demand and allow supply time to catch up. Consumer spending will moderate as pent-up demand from the pandemic restriction eases, and the cost of borrowing increases. As global bottlenecks gradually resolve, and tighter monetary policy works its way through the economy, inflation will start to come down, and with the prices of many of the commodities we export to remain elevated, the global forces slowing growth will not affect Canada as much as in many other countries.”
This comes as Canada faces record low unemployment and increasing wages.