RBC Economics assistant chief economist Nathan Janzen discusses why there’s not much the central bank can do about increasing food and fuel prices, and what it’s trying to accomplish
Recession risks have mounted as the Bank of Canada continues its path on raising interest rates in an attempt to tame inflation, which is being felt more acutely among clients who face a prolonged period of rising prices.
Recessions, of course, aren’t good for investments. Give us your outlook on where we are and what will happen with investments as we go into a recession. [For investors] asset values have already fallen a lot on the expectation that there’s going to be a recession next year. So, to an extent for markets, the idea that there’s going be a recession in the next year is not going to be a surprise. A lot of that is expected and priced in.
The kind of inflation central banks are trying to get back under control is the broader inflationary trends that are pushing service prices higher. We get that question as well and it’s not usually a satisfactory answer to tell [clients], ‘Well, the bank can’t do anything about it.’ So, they’re just going to push rates higher anyway, but that’s the kind of environment we’re in, and we also know the alternative is much higher inflation for much longer.
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