Labour has the power to bargain for better wages: Economist
One of Bay Street's top economists said he expects the Bank of Canada to strike a more hawkish tone in its statement on interest rates and the economy this week.
In an interview on Monday, CIBC Deputy Chief Economist Benjamin Tal said he anticipates the central bank will indicate interest rates will be rising sooner than most observers are currently forecasting. He pointed to tightness in the labour market as the main source of pressure on rates.
"I think they will be a bit more hawkish," Tal said. "They will talk about inflation, they will talk about the labour market getting stronger than expected.”
“Economics 101 suggests when you don't have (enough) labour, wages have to rise. They know this. They will be more careful, more conservative, and clearly will hint that interest rates will be rising sooner than expected."
In October, Bank of Canada Governor Tiff Macklem said the central bank would consider raising rates as soon as April 2022.
The Bank of Canada is scheduled to make its announcement on rates on Wednesday at 10 a.m. ET.