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MNI INTERVIEW: BOC Rate Hikes Being Under-Estimated-CD Howe

(MNI) Ottawa
(MNI)

Money supply growth is adding hidden pressure on inflation.

Investors are likely underestimating how much the Bank of Canada will raise interest rates because they are overlooking money-supply growth that is putting hidden upward pressure on inflation, according to former central bank researchers.

Former BOC analyst and associate research director at C.D. Howe Institute Jeremy Kronick told MNI in a phone interview on Monday that money supply is a reason the central bank has consistently under-estimated the post-Covid-19 inflation rise. The trend growth of money has climbed 1.5 percentage points since the pandemic, about double the inflation trend, and it will take about two years for prices to catch up.

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Investors are likely underestimating how much the Bank of Canada will raise interest rates because they are overlooking money-supply growth that is putting hidden upward pressure on inflation, according to former central bank researchers.

Former BOC analyst and associate research director at C.D. Howe Institute Jeremy Kronick told MNI in a phone interview on Monday that money supply is a reason the central bank has consistently under-estimated the post-Covid-19 inflation rise. The trend growth of money has climbed 1.5 percentage points since the pandemic, about double the inflation trend, and it will take about two years for prices to catch up.

Keep reading...Show less