The galloping inflation that is hitting North America raises the risk of a recession here.
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While the US central bank raised its key rates by three-quarters of a point (the largest increase since 1994) in order to fight inflation, its Canadian counterpart might follow suit.
“What this shows is that we are putting the brakes on, the economy has overheated. If we raise rates very quickly, the economy will react,” said Robert Asselin, vice-president of public policy at the Business Council of Canada.
To better understand the situation, the expert compares inflation to cancer, since “if you let it spread all over your body, it will be more and more difficult to remove it”.
“If inflation becomes entrenched, that’s the danger, it’s companies raising wages, raising prices, that’s very hard to bring back to its level followingwards,” explained M Asselin.
The intervention of the central banks which seek by increasing the key rates to bring prices back to their usual level, is a swing of the pendulum, with the aim of avoiding making the taxpayer whose purchasing power has not increased pay. .
However, “it might be painful, cause a recession, then in a recession we will still be forced to stimulate the economy,” he added.
Watch the full interview with Robert Asselin in the video above.
