“With many central banks still signalling possible further rate hikes, we keep getting asked if there are other ways to combat inflation. The short answer: yes,” said Desjardins Group principal economist Hendrix Vachon, the day after the Bank of Canada increased rates to five per cent — a 22-year high.
The future of further rate increases is being hotly debated following the release of June inflation numbers on July 18 that showed the overall consumer price index decelerating to 2.8 per cent year over from 8.1 per cent last year.and is fuelling inflation, proven, he said, by the 30-per-cent increase in mortgage costs Statistics Canada recorded in the June CPI.Article content
Meanwhile, other major bank economists and research companies said the central bank’s preferred inflation measures, including one that , are stuck above the top end of the central bank’s inflation target of three per cent, meaning another rate hike might be coming.High inflation has two drivers: elevated demand and constrained supply. Governments, the economist suggested, have the tools to tackle both.
To slow demand, governments could raise sales taxes, although doing so could lead to higher prices. However, Vachon said inflation is typically tracked excluding taxes. He suggested governments could tackle overconsumption with right-to-repair legislation and address “planned obsolescence” in consumer products.Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.
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