NO INCREASE IS INTEREST RATES WAS A PUBLIC RELATION STUNT-SAYS ECONOMIST!

Was the Bank of Canada’s decision not to hike its policy rate in the first announcement of this year a surprise? Not at all, according to Canadian Imperial Bank of Commerce (CIBC) deputy chief economist Benjamin Tal (pictured top), who said that the statement represented little more than a “huge PR exercise.”

Many economists had anticipated that the Bank would react to the threat posed by inflation, currently at a 30-year high in Canada, with a hike from the rock-bottom 0.25% that the benchmark rate has remained at throughout the COVID-19 pandemic.

However, speaking with Canadian Mortgage Professional, Tal said that it made little difference economically to wait until March to raise that rate, with the Bank’s decision to hold steady reflecting the ongoing complication of the Omicron wave.

“It’s nothing to do with economics. Whether or not they move in January or March – the debate is much ado about nothing, because economically speaking it doesn’t make much of a difference,” he said.

“Really, it’s a PR story. On the one hand, you have inflation, and you don’t want to be seen as being behind the curve, so you want to raise interest rates. At the same time, do you really want to raise interest rates in the middle of a pandemic?”

With the economy likely to lose 100,000 jobs in January, and as small businesses continue to feel the brunt of restrictions because of the pandemic, Tal said that the Bank had effectively signalled rate hikes were imminent – but opted against imposing them straight away.# SANDI HALPERN # SOLD # LEASED # INTEREST RATES #covid #economy #interestrates