Ed joined BNN Bloomberg today to discuss the Bank of Canada’s largest interest rate hike since 1998. He highlighted that the BoC wants to “frontload” interest rates by raising them now to break any wage-price spiral that might take root, rather than signal a faster tightening cycle in the future. Ed also emphasized that two things must be taken into account:

1) The inflation problem is global, and Canadian interest rate changes won’t necessarily solve it

2) There is a massive debt stock in Canada, and raising interest rates will significantly slow down the more rate-sensitive parts of the economy.

In the second part of this interview, Ed gave his thoughts on the BoC’s press conference about the rate hikes. He stated that the number one priority for the BoC is to manage inflation expectations in an unusual time for the economy, and that they communicated this well in the press conference. Ed also stated that the BoC’s explanation for why preliminary inflation forecasts were off seemed reasonable. He acknowledged that the probability of a recession is now higher after the rate hike, in part because the housing market will be more severely affected than was suggested in the Bank’s press conference.