On Wednesday, the Bank of Canada increased the scope of its interest rate increases, raising its overnight rate target by 100 basis points to 2.5 per cent. We haven’t seen a hike that big in recent memory, and the target rate is now higher than at any time since before the financial crisis in 2008.
With mortgage and other market interest rates increasing with the overnight rate, fears of a recession are mounting. There are two big questions. First, are there alternatives to the blunt overnight rate for fighting inflation? Second, how bad will the recession need to be to bring inflation back down? Unfortunately, the answer to the first question is no, there aren’t any viable alternatives. However, the recession…
Yet another alarming inflation number from Statistics Canada — 7.7 per cent from May to May — has underlined that something is seriously wrong with Canada’s economy. Prices are rising fast because spending is rising fast while production is not. The capacity of our economy to produce is flatlining because business investment has been so weak that the stock of productive capital per worker is falling. If we do not turn that around, the outlook for real growth in living standards in the coming months, years and decades is bleak.
The basic problem is chronically low business investment, which has been the highlight — or lowlight — of Statistics Canada’s quarterly GDP reports for several years now. The cumulative effect of low rates…
At the four-month mark, the costs of Vladimir Putin’s “special military operation” have both soared and spread. The war already has moved well up the ranks of the bloodiest modern wars on record, the direct economic costs have mounted steeply, and the spillover effects have gone global.
For Ukraine, the physical damage is now likely on the order of US$150 billion as city after city in the path of Putin’s army is shelled into rubble. Ukraine’s economy will contract by 45 per cent in 2022, based on recent World Bank estimates. This reflects the mass destruction or shutdown of businesses, the blockade of Ukraine’s main export routes through Black Sea ports and the dislocation of one-third of its households and workers. For the…
