Ed joined BNN Bloomberg this morning to discuss the Bank of Canada’s upcoming rate hike. He began by stating that this is one of the most complicated set of market conditions he has ever seen, and that a difference of as little as 1.5% between expected an real inflation could have a massive impact. Ed predicted that there would be a 25 basis point hike now, with signals that another 25 point hike could be on the table. He emphasized how not getting inflation expectations under control now could necessitate drastic measure in the future, and that the BoC needs to signal that it is serious in order to push the bond market out of complacency. This risk is exacerbated by the presence of unknown factor outside the BoC’s control, such as China or stagflationary forces. While a housing-led recession seems very likely in Canada, investors need to remember that the Bank of Canada’s policy target is inflation- not growth, housing, or employment. Ed highlighted that inflation is moving in the right direction, we just need to make sure we “finish the job”- even if that means enduring a recession in order to anchor inflation expectations.