OTTAWA - The Bank of Canada is moving ahead with another hike to its key policy rate in the face of decades-high inflation rates and record-low unemployment rates.What is the key policy rate and what does it do?
Lowering the key rate makes it cheaper to borrow and spend, usually during economic downturns when inflation rates are too low, with the goal of creating growth. Raising rates has the opposite effect by cooling spending when inflation rises above the Bank of Canada’s comfort zone of between one and three per cent.One big reason is demand for goods like household items is outpacing the capacity of manufacturers and supply chains.
“Conflict inflation is going to be lower in headline going forward, but more painful for growth,” she wrote.The concern from economists, and the central bank by extension, is that people begin to expect inflation to stay higher for longer. Businesses would start working in faster price increases to keep ahead of expectations for rising costs. Workers would ask for wage increases to keep up with the cost-of-living. A spiral could ensue where wages become a key driver of price increases.
Other central banks, such as the U.S. Federal Reserve, more explicitly target maximum employment as part of their mandate.
The govt must react this is not a time to increase interest rates last year one bank made $22 billion dollars in profits so they can’t say they r in loses please stop this & coz of inflation give relief to the public, We must stand together other wise in 6 months we will b bank c
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