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Bank of Canada warns of rate hike

Bank of Canada warns of rate hike

Long predicted due to accelerating inflation in the country, the Bank of Canada’s key interest rate will be raised soon.

At least that’s what Bank of Canada Governor Teff McClem suggested in a speech to the Canadian Chamber of Commerce on Wednesday.

“It is our responsibility to bring inflation down to a low, stable and predictable rate so that Canadians can plan and invest with confidence,” McClem said, noting that inflation, which reached a rate of 4.8% in the country in December (5.1%). in Quebec) well above the 2% target.

Thus, the Bank of Canada still intends to raise the key interest rate to the minimum at 0.25% since the beginning of the pandemic in March 2020.

“As the pandemic subsides, economic conditions should return to normal across the board, relieving pressures on global commodity prices. Inflation should then fall relatively quickly in the second half of 2022, to around 3% by the end of the year, As Mr. McClem argued.

Moreover, if the Canadian economy, in general, recovers well from the pandemic, companies will have to do more to ensure their sustainability.

The governor explained that overall, the recovery in employment was more noticeable in Canada than in the United States after the first booking, but that American employees noticed a larger increase in their hours.

So we can say that the recovery of the employment factor was quite similar in the two countries. The difference is in the aspect of productivity. Productivity growth has been significantly stronger in the United States, so with labor input recovery roughly equivalent to that in Canada, our neighbors to the south have seen a stronger increase in production.”

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According to him, American companies have been more willing to invest in human capital and technology during the pandemic than those in Canada.

So Canadian companies will have to catch up, which is not impossible.

“According to our latest Business Outlook Survey, 62% of respondents said they expect to spend more on machinery and equipment next year compared to last year, a level not seen since we began conducting this investigation, in 1999,” the governor stressed.