As we close out Q2 and head into the second half of the year, we should probably prepare for high interest rates for quite a while yet.
Although this week’s report that Consumer Price Index figures, which are the primary gauge of inflation, went down in May there is a growing consensus among economists that this is not enough – not nearly enough – to get us on a track towards lower interest rates.
Among those voices is Peter Andersen, a former Bank of Canada economist who now prepares a monthly bulletin for the CEOs who participate in TEC Canada’s executive development program. He says inflation is just too well entrenched, pointing to strong consumer demand and rising housing costs as key contributors.
Also, there is the matter of labour. Normally, high interest rates would trigger layoffs or, at very least, less job creation.
But employers are continuing to hire and paying higher wages, but productivity is not rising to match the added expenditure which makes things more expensive, increasing inflationary pressures even further and squeezing business margins.
