(OTTAWA) The Bank of Canada’s strategy of rapidly raising its key interest rate in an effort to combat accelerating inflation will likely trigger a recession, concludes a new study by the Canadian Center for Policy Alternatives (CCPA). ).
Posted at 10:50 a.m.
According to the research institute, the central bank’s operation to bring inflation down from 7.7% to its target of 2.0% by rapidly raising rates could lead to significant “collateral damage”, including the loss of 850,000 jobs.
The CCPA points out that the central bank has had a 0% success rate with this approach. Annual inflation has fallen 5.7 percentage points three times in the past 60 years, each time after sharp interest rate hikes and a recession, the analysis continued.
According to the CCPA, it is time for a new policy on inflation.
The Bank of Canada could potentially reduce the risk of pushing the economy into recession if it adjusted its inflation target to 4.0%, he calculates.
The study comes a day after the release of two quarterly Bank of Canada surveys, which revealed that consumers and businesses expected inflation to remain high for several years.