The recovery from the pandemic created strong demand for products and services, but supply remained weak as a result of supply chain disruptions, labour shortages, and the rising cost of food and oil. Together, these factors have contributed to high inflation, which central banks are fighting by raising interest rates. But some of these factors are beyond the reach of central bank’s efforts, like rising energy prices caused by the war in Ukraine, said Prof. Sebastien Betermier in an interview with CTV News.
But, according to the Associate Professor of Finance at Desautels, there are steps governments can take. By working to alleviate backlogs at ports and customs, governments can help ease supply constraints. Reducing our immigration backlog could help remedy labour shortages, and targeted support for those most impacted by high interest rates could help ease the crunch of inflation and high interest rates.