Be careful of the wishful thinking scenario on interest rates and inflation.
That warning comes from Peter Andersen. He is a former Bank of Canada senior economist who now writes a monthly outlook for CEOs who are member of the TEC Canada organization.
He says the media is posing a scenario where interest rates start to fall next year as inflation eases. But he says to be cautious with that narrative, warning further that the slowdown is already happening.
If your business has seen it, expect more and if it hasn’t hit yet, get ready. He says the drought is a factor.
Falling food and energy prices have helped lower the inflation number but Saudi oil production cutbacks are now raising prices so don’t count on energy.
And then there’s food. With our drought and war affecting exports from Ukraine, the price of basics such as wheat will rise. Again, that is not helpful in lowering inflationary pressure.
Wage pressure, especially in Canada, is another signal. Wages here are rising faster than in the US and our productivity is falling: both factors that push prices higher.
