It will take about two years to bring inflation and interest rates back to pre-pandemic levels, a Bank of Canada deputy governor says.
Paul Beaudry made the comments while speaking to University of Waterloo students in a lecture on the topic “Pandemic macroeconomics: What we’ve learned, and what may lie ahead,” on Sept. 20.
“Inflation has been picking up,” he said during the lecture, according to Blacklock’s Reporter.
“There’s a lot of questions that are being asked about what to do about it. We at the Bank of Canada are raising rates to slow the economy down.”
A student asked Beaudry how long it will take to bring back inflation to two percent.
“To really get down to that two percent, we think it takes about two years,” answered Beaudry, who took his post in 2019 and is involved in setting monetary policy.
The inflation data for August, measured by the Consumer Price Index (CPI), came in at a seven percent increase month-over-month on Sept. 20.
This was down from 7.6 percent in July due to lower prices in transportation and shelter, but the price of groceries rose at 10.8 percent, the fastest pace since August 1981.
When asked by a student whether the rising rates might cause a recession, Beaudry responded “It’s certainly too early to call.”
Officials south of the border have also been cautious when discussing recession.
“No one knows whether this process will lead to a recession or if so, how significant that recession would be,” Federal Reserve Chair Jerome Powell told reporters on Sept. 21 after raising rates by 0.75 percent for the third time in a row to reach 3.25 percent.
The Bank of Canada’s (BoC) policy rate currently also sits at 3.25 percent, having increased by 3 percent since March.
Beaudry said in hindsight central banks and governments should have withdrawn the stimulus earlier to help with COVID-19 recovery.
“It’s likely a somewhat faster global (stimulus) withdrawal process could have made all countries better off,” he said.
The theme of central banks increasing the money supply and government spending generating inflation has been an ongoing focus of new Conservative Party Leader Pierre Poilievre.
“When I saw the government beginning to print money to pay for exorbitant spending, I knew that inflation was just down the road,” Poilievre said in November 2021.
“The massive influx of cash as a result of a half-a-trillion dollars of deficits has, indeed, driven up prices.”
Poilievre said after announcing his leadership bid he would fire the BoC’s Governor Tiff Macklem over his management of inflation.
The Canadian Press contributed to this report.