Executive director of economics at TD, James Orlando, said the slowing economy gives the Bank of Canada reason to hold interest rates where they are, even if inflation ticks higher in the short term
Economists are forecasting inflation reaccelerated to around four per cent last month, reversing previous progress made as gasoline prices push inflation higher.
Desjardins’ managing director and head of macro strategy Royce Mendes said he expects headline inflation to come in at four per cent for August, up from 3.3 per cent in July. Meanwhile, TD anticipates inflation rose to 3.8 per cent. Executive director of economics James Orlando said another factor likely contributing to higher inflation in August is the fact that inflation started to decline a year ago.
Earlier this month, the Bank of Canada opted to hold its key interest rate steady at five per cent after hiking rates at its two previous meetings. The decision was made after recently released data showed the economy contracted in the second quarter. “All the things that you worry about that could lead to greater domestic inflation in Canada … those are starting to show very rapid slowing in the Canadian economy,” Orlando said.
In the meantime, however, the Bank of Canada will have make sense of inflation rising again for Canadians.
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