This article originally appeared in the Financial Post. Below is an excerpt from the article, which can be read in full here.
By Jack Mintz, September 9, 2022
With its three-quarter per cent hike in its trend-setting interest rate yesterday, the Bank of Canada is hoping to cool off a still-expanding economy and get inflation back down to its official target rate of two per cent. Further rate hikes are likely and the question remains whether what will follow them is a successful soft landing or 1970s-style stagflation.
Over the past three decades, the Bank of Canada developed a strong reputation for solid monetary policy. When he was appointed in 1987, Governor John Crow was determined to bring inflation down — it had been as high as 12 per cent in 1981 — and he did so with sharp increases in interest rates to 14 per cent by 1991. The Canadian economy went into a deep recession, partly because of Crow’s policies but also because of a U.S. recession caused by the savings-loan crisis in the late 1980s. The silver lining to recession was that inflation fell to two per cent and remained at roughly that level for almost 30 years.
The bank’s reputation was also burnished by how it dealt so successfully with the 2008 financial crisis, promptly providing liquidity to Canadian banks as global credit markets froze due to the U.S. mortgage upheaval.
***TO READ THE FULL ARTICLE, VISIT THE FINANCIAL POST HERE***
