Governments need to help the Bank of Canada in its battle against inflation by reining in spending, says CIBC. Read more
The economists say federal and provincial governments are missing an opportunity to address deficits and reduce debt, while helping the Bank put a damper on growth.
“One way or another we will need to go through at least a stall in growth to get inflation back to the 2 per cent target,” they wrote. “So the drag from fiscal restraint would be offset by the ability to chart a softer course on interest rates, by cancelling further hikes we might still face and bringing forward the timing for some interest rate reductions.”hit the housing market“That’s hardly ideal in an environment in which a shortage of housing is pressuring apartment rents and the overall cost of home ownership,” they said.
Higher borrowing costs also put a damper on businesses’ capital spending, when investing to improve productivity would lower inflation by reducing costs and labour demand.“At a minimum, this isn’t the year for finance ministers who find a bit more money in their coffers at mid-year to look for new ways to spend it or dole it out for households.”
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