Prominent Bay Street economist disputes Bank of Canada's assertion that wages are stoking inflation via financialpost
Average hourly wages have been growing at an annual rate of around four per cent to five per cent for the better part of a year. The Bank of Canada says that’s contributing to “excess demand,” because it’s calculations suggest wage growth of more than about three per cent encourages households to spend at a pace greater than the economy’s capacity to keep up with orders.“There’s so much more at play,” said Donald.
Donald questioned the premise for higher interest rates, noting much has changed since “our economics textbooks told us that if we trade openly with our trading partners, prices come down and that’s good for everyone.” The Bank of Canada’s interest rate hikes have so far been effective at bringing inflation down from 40-year highs. The, which measures inflation, peaked at 8.1 per cent in June and the latest data showed growth slowed to 4.3 per cent year over year in March.
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