With the Bank of Canada announcing an oversized interest rate hike this week, it might seem like central banks are coming to rescue us from inflation once again. Yet while they did play an important role in mitigating a COVID-induced recession, central banks don’t have the power to solve our inflation problem.
There’s no question that the inflation outlook today is worrying. With inflation hitting 5.7 per cent in March, we are facing a perfect storm of inflationary pressures from a combination of supply chain bottlenecks, pent-up demand and massive increases in energy prices from Russian sanctions.
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