{"id":28779,"date":"2022-12-06T14:09:12","date_gmt":"2022-12-06T14:09:12","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2022\/12\/06\/pandemic-benefits-likely-drove-more-bank-of-canada-interest-rate-hikes\/"},"modified":"2022-12-06T14:09:12","modified_gmt":"2022-12-06T14:09:12","slug":"pandemic-benefits-likely-drove-more-bank-of-canada-interest-rate-hikes","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2022\/12\/06\/pandemic-benefits-likely-drove-more-bank-of-canada-interest-rate-hikes\/","title":{"rendered":"Pandemic benefits likely drove more Bank of Canada interest rate hikes"},"content":{"rendered":"<p> \n<\/p>\n<div id=\"\">\n<header aria-label=\"Beginning of Article\" class=\"article-header\">\n<div class=\"sponsored-meta sponsored-meta--story\" data-aqa=\"sponsorship\">\n<div class=\"sponsored-meta-content\">\n<div class=\"sponsored-meta-content-text\"> This section is <\/p>\n<div class=\"popover\" data-aqa=\"popover\" data-click-to-appear=\"True\" data-container=\"\" data-container-offset=\"\" data-popover-component=\"\" data-position=\"\"> <button class=\"popover__trigger\"> <span class=\"popover__text\"> Presented <\/span> <\/button> <\/p>\n<div aria-describedby=\"popover-desc-sponsored-popup\" class=\"popover__content\" hidden=\"\" role=\"dialog\">\n<div class=\"popover__content__wrapper\">\n<p> This section was produced by the editorial department. The client was not given the opportunity to put restrictions on the content or review it prior to publication. <\/p>\n<p> <button class=\"popover__content__close\" tabindex=\"-1\" title=\"Close\"> <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" xmlns:xlink=\"http:\/\/www.w3.org\/1999\/xlink\" class=\"icon--close\" height=\"12\" version=\"1.1\" viewbox=\"0 0 12 12\" width=\"12\"><polygon points=\"12 0.95 11.05 0 6 5.05 0.95 0 0 0.95 5.05 6 0 11.05 0.95 12 6 6.95 11.05 12 12 11.05 6.95 6\"\/><\/svg><\/button> <\/div><\/div><\/div>\n<p> by  HSBC  <\/p><\/div>\n<div class=\"sponsored-meta-content-logo-container\">   <\/div><\/div><\/div>\n<nav aria-label=\"Breadcrumb\" class=\"breadcrumbs\" data-aqa=\"nav-breadcrumb\">\n<h2 class=\"visually-hidden\">Breadcrumb Trail Links<\/h2>\n<ol class=\"breadcrumbs__items list-unstyled\">\n<li class=\"breadcrumbs__item\"> News <\/li>\n<li class=\"breadcrumbs__item\"> Economy <\/li>\n<\/ol>\n<\/nav>\n<div class=\"article-header__detail\">\n<div class=\"article-header__detail__texts\">\n<p class=\"article-subtitle\"> Scotiabank estimates Macklem could have stopped interest rates at 2.5% if not for consequences of COVID supports <\/p>\n<div class=\"article-meta\">\n<div class=\"published-date\">\n<p>Publishing date:<\/p>\n<p> <span class=\"published-date__since\">Dec 06, 2022<\/span> \u00a0\u2022\u00a0 <span class=\"updated-date__since\">2\u00a0hours ago<\/span> \u00a0\u2022\u00a0 <span class=\"published-date__word-count\">5 minute read<\/span> <\/div>\n<p>  <span class=\"comment-bubble\"> <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" height=\"16\" viewbox=\"0 0 24 24\" width=\"16\"><path d=\"M4,0 C2.93914,0 1.921718,0.421428 1.171572,1.171572 C0.421428,1.921718 0,2.93914 0,4 L0,24 L3.846,20.158 L4,20.16 L20,20.16 C21.0608,20.16 22.0782,19.73858 22.8284,18.98842 C23.5786,18.23828 24,17.22086 24,16.16 L24,4 C24,2.93914 23.5786,1.921718 22.8284,1.171572 C22.0782,0.421428 21.0608,0 20,0 L4,0 Z M2,4 C2,3.46956 2.21072,2.96086 2.58578,2.58578 C2.96086,2.21072 3.46956,2 4,2 L20,2 C20.5304,2 21.0392,2.21072 21.4142,2.58578 C21.7892,2.96086 22,3.46956 22,4 L22,16.16 C22,16.69044 21.7892,17.19914 21.4142,17.57422 C21.0392,17.94928 20.5304,18.16 20,18.16 L4,18.16 L3.048,18.126 L2,19.174 L2,4 Z\"\/><\/svg><\/span> <span class=\"article-meta-comment-count__text\"> 10 Comments <\/span>  <\/div><\/div>\n<figure class=\"featured-image\" data-aqa=\"featured-image\"><picture class=\"featured-image__ratio\"><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=564&amp;h=423&amp;type=webp,&#10;            https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=1128&amp;h=846&amp;type=webp 2x\" type=\"image\/webp\"\/><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=564&amp;h=423&amp;type=jpg,&#10;                https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=1128&amp;h=846&amp;type=jpg 2x\" type=\"image\/jpeg\"\/><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=472&amp;h=354&amp;type=webp,&#10;            https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=944&amp;h=708&amp;type=webp 2x\" type=\"image\/webp\"\/><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=472&amp;h=354&amp;type=jpg,&#10;                https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=944&amp;h=708&amp;type=jpg 2x\" type=\"image\/jpeg\"\/><source media=\"(max-width: 767px)\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=288&amp;h=216&amp;type=webp,&#10;            https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=576&amp;h=432&amp;type=webp 2x\" type=\"image\/webp\"\/><img loading=\"lazy\" decoding=\"async\" alt=\"COVID-19 benefit cheques. Scotiabank says the generous benefits likely fuelled excess demand in the economy.\" class=\"featured-image__image type:primaryImage\" height=\"750\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=288&amp;h=216\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=288&amp;h=216,&#10;                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/cerb-vw1206.jpg?quality=90&amp;strip=all&amp;w=576&amp;h=432 2x\" width=\"1000\"\/><\/picture><figcaption class=\"featured-image__caption image-caption\"><span class=\"caption\">COVID-19 benefit cheques. Scotiabank says the generous benefits likely fuelled excess demand in the economy.<\/span> <span class=\"credit\">Photo by Peter J. Thompson\/National Post<\/span> <\/figcaption><\/figure>\n<\/div>\n<\/header>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>One of Bay Street\u2019s top economists estimates that the Bank of Canada\u2019s benchmark interest rate is headed to 4.25 per cent, and more than a percentage point of the increase will have been necessitated by a need to offset \u201cexcess demand\u201d created by what appears to have been overly generous COVID benefits.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment3089965286449712676373014572433408\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment3089965286449712676373014572433408\">Advertisement 2<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-2\">\n<div class=\"ad__inner__container\" data-ad=\"[[6,6],[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-interscroller=\"6x6\" data-ad-loc=\"2\" data-ad-mobile=\"[[6,6],[320,50],[300,50],[300,250],[300,600]]\" data-aqa=\"advertisement\" id=\"ad-2\" style=\"--desktopHeight:250px;--mobileHeight:600px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p data-async=\"\">\u201cPandemic support programs for firms and households are creating the excess demand that the country is experiencing,\u201d Bank of Nova Scotia chief economist Jean-Fran\u00e7ois Perrault concludes in a new assessment of Canada\u2019s inflation scare, published Dec. 5.\u00a0\u201cAbsent from these support measures, Canada would still be in excess supply.\u201d<\/p>\n<\/section>\n<div class=\"article-content__widget-group article-content__widget-group--content-slot6 article-content__widget-group--newsletter-slot\">\n<section aria-labelledby=\"FinancialPostTopStories3980492772759116216095192293310464\" class=\"newsletter-widget fp-headlinenews background--primary-light-gradient\" data-account-id=\"b9d3df2fccd108b5eff3c44f573b2cd6\" data-aqa=\"widget-newsletter\" data-newsletter=\"single\" data-newsletter-component=\"\" data-target-list=\"FP_HeadlineNews\" data-widget=\"newsletter\"><img decoding=\"async\" alt=\"Financial Post Top Stories Banner\" class=\"newsletter-widget__banner\" height=\"60\" loading=\"lazy\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/06\/FPTopStories-06232021.jpg\" width=\"97\"\/><\/p>\n<div class=\"newsletter-widget__body\">\n<h2 class=\"newsletter-widget__title\" id=\"FinancialPostTopStories3980492772759116216095192293310464\">Financial Post Top Stories<\/h2>\n<p class=\"newsletter-widget__text\">Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.<\/p>\n<div class=\"js-replace-main\">  <small class=\"newsletter-widget__disclaimer text-size--micro\"> By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300 <\/small> <\/div>\n<div class=\"js-submit-success\" hidden=\"\" id=\"submitSuccessFP_HeadlineNews\">\n<h3 class=\"newsletter__feedback--heading\">Thanks for signing up!<\/h3>\n<p class=\"newsletter-widget__text\">A welcome email is on its way. If you don&#8217;t see it, please check your junk folder.<\/p>\n<p class=\"newsletter-widget__text newsletter__feedback--last\">The next issue of Financial Post Top Stories will soon be in your inbox.<\/p>\n<\/p><\/div>\n<p class=\"newsletter-widget__text js-submit-error\" hidden=\"\" id=\"submitErrorFP_HeadlineNews\"> We encountered an issue signing you up. Please try again <\/p>\n<\/p><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<\/section>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>By \u201cexcess supply,\u201d Perrault, a former assistant deputy minister at the Finance Department, means the economy would be weaker than it is today: suppliers of goods and services wouldn\u2019t be struggling to fill orders as they have been for much of the year, and there would be less upward pressure on inflation.<\/p>\n<p data-async=\"\">The thrust of the Scotiabank report was to assess what\u2019s driving inflation, not pass judgement on Ottawa\u2019s response to the COVID recession. Perrault and and his co-author, Ren\u00e9 Lalonde, the bank\u2019s director of modelling and forecasting, wrote that the main fiscal rescue programs \u2014 the Canada Emergency Response Benefit (CERB) and its successor benefit, the Canada Recovery Benefit (CRB), along with Canada Emergency Wage Subsidy \u2014 had a \u201clarge and welcome impact on the economy,\u201d as an extraordinary economic collapse was followed by the engineering of an equally extraordinary recovery.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment6822938249931055733671249504632832\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment6822938249931055733671249504632832\">Advertisement 3<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-3\">\n<div class=\"ad__inner__container\" data-ad=\"[[7,7],[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-interscroller=\"7x7\" data-ad-loc=\"3\" data-ad-mobile=\"[[7,7],[300,250],[320,50],[300,50]]\" data-aqa=\"advertisement\" id=\"ad-3\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>Still, with hindsight, they said Ottawa\u2019s response was \u201clikely exaggerated,\u201d and the \u201cinflationary impulse\u201d created by that spending is what Bank of Canada governor Tiff Macklem is now trying to offset with the most aggressive series of interest-rate increases since the central bank began targeting inflation in the 1990s.<\/p>\n<p>\u201cThe Bank of Canada\u2019s policy rate would not need to be above neutral were it not for these programs,\u201d Perrault and Lalonde wrote.<\/p>\n<p>The neutral rate is the theoretical rate at which the central bank and economists estimate that borrowing costs would be neither impeding nor encouraging economic growth. The Bank of Canada estimates the neutral rate is between two per cent and three per cent, and the Bank of Nova Scotia\u2019s economics team puts the rate at 2.5 per cent.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment4646809852145915169586694041108480\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment4646809852145915169586694041108480\">Advertisement 4<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-4\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"4\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" data-aqa=\"advertisement\" id=\"ad-4\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>In other words, if Prime Minister Justin Trudeau had ended his rescue programs sooner, or made them less generous, interest rates probably would be lower, according to Perrault and Lalonde, who used their in-house economic model to produce an estimate on the main sources of inflation.<\/p>\n<p>They found that half of the upward pressure on prices since the end of 2019 was the result of global factors over which the central bank has little or no control, including U.S. inflation, commodity prices and a weaker exchange rate. And they found that supply constraints caused by the pandemic explain another 35 per cent of the increase in prices.<\/p>\n<blockquote class=\"\">\n<p>The Bank of Canada\u2019s policy rate would not need to be above neutral were it not for these programs<\/p>\n<\/blockquote>\n<p>That means purely domestic factors such as the pandemic programs account for a relatively small amount of the inflation, but they had a \u201cmajor impact\u201d on the \u201coutput gap,\u201d a concept that the Bank of Canada uses to take the temperature of the economy, as it measures the difference between policymakers\u2019 estimate of the value of all goods and services the economy can produce without stoking inflation, and the actual level of economic output.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment2326714228728948592056375936286720\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment2326714228728948592056375936286720\">Advertisement 5<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-5\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"5\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" data-aqa=\"advertisement\" id=\"ad-5\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p data-async=\"\">The CERB, which was swiftly put in place in March 2020 to provide $2,000 in monthly payments to Canadians who lost income from the pandemic; the wage subsidy, which supported employers; the CRB; and the Canada Rent Relief Program all helped the one million Canadians who lost their jobs during the onset of the pandemic, as well as many more struggling with shelter costs and running their businesses.<\/p>\n<p>Those programs pushed tens of billions of dollars into the economy, lifting the output gap by 1.3 percentage points alone, according to the Scoitabank study. It\u2019s the demand generated by that spending that the Bank of Canada is now trying to offset with higher interest rates, Perrault and Lalonde concluded.<\/p>\n<p data-async=\"\">The recovery had lots of momentum by the end of 2021, suggesting rescue programs could have been wound up. The CRB ended on Dec. 23, 2021, and the last of the pandemic-era supports, the Canada Recovery Caregiving Benefit (CRCB) and the Canada Recovery Sickness Benefit (CRSB), concluded on May 7, 2022.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment5584942343854296833471721521545216\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment5584942343854296833471721521545216\">Advertisement 6<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-6\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"6\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" data-aqa=\"advertisement\" id=\"ad-6\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<section aria-labelledby=\"moreTopicLabel9228935705369555876404739017015296\" class=\"more-topic\" data-aqa=\"embed-more-topic\" data-carousel-component=\"\" data-carousel-icon-button=\"\" data-carousel-type=\"list\"> <button aria-hidden=\"true\" class=\"more-topic__button-prev\" data-carousel-prev=\"\" tabindex=\"-1\" title=\"previous\" type=\"button\"\/> <\/p>\n<ol class=\"more-topic__items list-unstyled\" data-carousel-slide-list=\"\" tabindex=\"0\">\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" alt=\"Bank of Canada governor Tiff Macklem.\" class=\"lazyload\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1205-1.jpg?h=96&amp;strip=all&amp;quality=80\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1205-1.jpg?h=96&amp;strip=all&amp;quality=80,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1205-1.jpg?h=192&amp;strip=all&amp;quality=80 2x,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1205-1.jpg?h=288&amp;strip=all&amp;quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> Bea Bruske: Bank of Canada should pause rate hikes now to avert a manufactured recession <\/span> <\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" alt=\"None\" class=\"lazyload\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/12\/bank-of-canada-vw1205-1.jpg?h=96&amp;strip=all&amp;quality=80\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/12\/bank-of-canada-vw1205-1.jpg?h=96&amp;strip=all&amp;quality=80,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/12\/bank-of-canada-vw1205-1.jpg?h=192&amp;strip=all&amp;quality=80 2x,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/nationalpost\/wp-content\/uploads\/2022\/12\/bank-of-canada-vw1205-1.jpg?h=288&amp;strip=all&amp;quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> Interest rates are going up this week: What you need to know about the Bank of Canada decision <\/span> <\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" alt=\"Bank of Canada governor Tiff Macklem says the central bank got a lot of things right.\" class=\"lazyload\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1202.jpg?h=96&amp;strip=all&amp;quality=80\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1202.jpg?h=96&amp;strip=all&amp;quality=80,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1202.jpg?h=192&amp;strip=all&amp;quality=80 2x,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/tiff-macklem-vw1202.jpg?h=288&amp;strip=all&amp;quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> Kevin Carmichael: Jobs numbers show Bank of Canada hasn\u2019t wrecked the economy after all <\/span> <\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\">  <picture class=\"more-topic__item-image\"><img decoding=\"async\" alt=\"Rising interest rates have significantly cooled the housing market and for the first time mortgage origination has dropped below pre-pandemic levels.\" class=\"lazyload\" src=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/house-sold-0125.jpeg?h=96&amp;strip=all&amp;quality=80\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/house-sold-0125.jpeg?h=96&amp;strip=all&amp;quality=80,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/house-sold-0125.jpeg?h=192&amp;strip=all&amp;quality=80 2x,&#10;                                    https:\/\/smartcdn.gprod.postmedia.digital\/financialpost\/wp-content\/uploads\/2022\/12\/house-sold-0125.jpeg?h=288&amp;strip=all&amp;quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"> <span class=\"more-topic__item-text-clamp\"> Posthaste: What the Bank of Canada hike will mean for mortgage borrowers <\/span> <\/h3>\n<\/li>\n<\/ol>\n<p><button aria-hidden=\"true\" class=\"more-topic__button-next\" data-carousel-next=\"\" tabindex=\"-1\" title=\"next\" type=\"button\"\/> <\/section>\n<p>While there\u2019s little Macklem can do about the global drivers of inflation, interest-rate policy has considerable influence over domestic demand. If not for the excess demand stoked by the COVID rescues, Perrault and Lalonde estimate that the Bank of Canada could have stopped raising interest rates when the benchmark reached 2.5 per cent.<\/p>\n<p>The target rate is currently at 3.75 per cent, and Scotiabank\u2019s economics team predicts Macklem will lift borrowing costs to 4.25 per cent when he and his deputies conclude their latest round of deliberations on Dec. 7.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section aria-describedby=\"advertisment3114699021381694796605252639391744\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment3114699021381694796605252639391744\">Advertisement 7<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-7\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-loc=\"7\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" data-aqa=\"advertisement\" id=\"ad-7\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>Scotiabank expects a gradual decline in the pace of inflation over the next year to year and a half, averaging about 6.8 per cent for 2022. The team then expects inflation to fall to four per cent next year before returning to the Bank of Canada\u2019s two per cent target in 2024. Scotia sees higher interest rates combining with weaker demand for exports from China and Europe combining to cause a \u201cvery mild recession, akin to a stall in growth\u201d in the first half of 2023, followed by \u201cvery modest\u201d growth over the rest of the year.<\/p>\n<p>\u201cMuch of the reduction in inflation stems from a reversal of the global factors that have pushed inflation up in Canada and elsewhere,\u201d Perrault and Lalonde said in the report. \u201cThese factors (largely commodity prices and supply bottlenecks) have mostly unwound the gains made over the last year and appear to be slowly working their way through to inflation. That is expected to continue.\u201d<\/p>\n<p data-async=\"\"><em>\u2022 Email: shughes@postmedia.com | Twitter: <a class=\"twitter-follow-button\" data-evt=\"click\" data-evt-typ=\"click\" data-evt-val=\"{\" control_fields=\"\" link=\"\" href=\"https:\/\/twitter.com\/StephHughes95\" rel=\"nofollow noopener\" target=\"_blank\">StephHughes95<\/a><\/em><\/p>\n<p> <iframe loading=\"lazy\" frameborder=\"0\" height=\"1200\" id=\"\" src=\"https:\/\/modules.wearehearken.com\/financial-post\/embed\/9353\/share\" style=\"--height: 1200px; \" width=\"\"><\/iframe> <\/p>\n<\/section>\n<section class=\"article-content__share-group article-delimiter\" data-evt=\"beforeunload\" data-evt-typ=\"page_scroll\" data-evt-val=\"{\" control_fields=\"\">\n<h2 class=\"visually-hidden\">Share this article in your social network<\/h2>\n<\/section>\n<div class=\"article-content__ad-group\">\n<div class=\"ad__section-border ad__section-border--category visually-hidden\">\n<section aria-describedby=\"advertisment4111666440293437575845306796343296\" class=\"ad\">\n<h2 class=\"visually-hidden\" id=\"advertisment4111666440293437575845306796343296\">Advertisement <\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-acceptable\">\n<div class=\"ad__inner__container\" data-ad=\"[[1200,250],[1200,90],[970,90],[970,250],[728,90],[300,250]]\" data-ad-acceptable=\"\" data-ad-loc=\"1\" data-ad-mobile=\"[[320,50],[300,50],[300,250]]\" data-aqa=\"advertisement\" id=\"ad-acceptable\" style=\"--desktopHeight:250px;--mobileHeight:250px\">\n<div aria-hidden=\"true\" class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div><\/div>\n<\/section>\n<\/div><\/div>\n<footer aria-label=\"Article Comments\" class=\"article-footer\">\n<section class=\"comments__section\" data-aqa=\"viafoura-comments\" id=\"comments\">\n<h3 class=\"widget-title comments-anchor\" id=\"comments-area\">Comments<\/h3>\n<p class=\"comments__section-disclaimer\"> Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications\u2014you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings. <\/p>\n<\/section>\n<\/footer>\n<\/div>\n<p><script async src=\"\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><br \/>\n<br \/>\n<br \/>Pandemic benefits likely drove more Bank of Canada interest rate hikes<\/a><br \/>\n<br \/>2022-12-06 14:09:12<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This section is Presented This section was produced by the editorial department. 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