Using the right piece of equipment from the toolbox is an important first step in any repair job. Grabbing a hammer to cut a piece of wood is not all that helpful.
It is the same story in the world of economics. We have seen central bankers all around the world hike interest rates as they look to solve the problem of inflation.
Basically, they have pulled interest rates out of the toolbox and apply them with force. But a report from economist Peter Andersen, writing in his monthly update to Canadian CEOs involved in TEC Canada, suggests they might be trying to cut a board with a hammer.
Higher interest rates are supposed to slow things down and you’d expect employers to respond to falling demand with layoffs but there is another factor at play here: demographics.
So, many Baby Boomers are retiring and no one is being laid off. In fact, we’re short of workers and that shortage is pushing up wages — and with them prices. It might be time to rethink which tools the authorities are deploying.