An unexpected resurgence in inflation has triggered concerns in the market, prompting discussions about potential interest rate hikes. Some economists argue that the Bank of Canada (BoC) should take action as early as its next meeting on June 7.
Statistics Canada’s report on May 16 revealed that the April consumer price index (CPI) had risen by 4.4% compared to the previous year, surpassing economists’ expectations of 4.1%.
In an effort to curb the surge in inflation, the Bank of Canada has gradually increased its benchmark rate from 0.5% to 4.5% over the past year.
Holt presented several arguments in favor of Bank of Canada Governor Tiff Macklem considering rate hikes during the June 7 meeting. Among these arguments is the concern surrounding inflation expectations.
The economist elaborated on this point in his note, stating, “There is the debate over crushing it now versus hanging out higher for longer. The way I settle that is by portraying the challenge of getting inflation under control as a race against the clock.”