If the economists at ScotiaBank have it right, we still have a long ways to go in the fight to bring inflation back into the target range.
Their reading of the tea leaves, in fact, has us going the other way. The resilience of the North American economy is eye popping. We continue to add jobs and pay higher wages without adding to our productivity, which is pushing inflation higher, even in the face of rising interest rates designed to reverse that upward trend.
As a result, the bank expects we will see more interest rate increases in the future and they can’t come soon enough because we are starting to see a lot of labour militancy. The increased frequency of major labour disruptions triggered by workers demanding higher pay will only grow the longer the central bank hesitates to hike their benchmark rate more aggressively.
Even investors are now expecting another quarter point hike at the Bank of Canada’s next setting in early September, according to the bank, as the big money houses have now priced that increase into their modeling.
