In my March 10 commentary, I explored the impacts of the situation in Ukraine on ongoing global pricing pressures, growth, and monetary policy. The events of the day have thrust central bankers into the one place they don’t like to be: The spotlight.
With demand booming, production working hard to recover and persistent supply chain disruptions, there are concerns that soaring prices will cut into consumers’ wealth and ability to spend and herald a more difficult planning environment for companies going forward. Will inflation throw this recovery off?
EDC Economics believes that as the pandemic loosens its grip, helping to alleviate supply constraints and leading to a rotation in spending back toward “experiences,” or services, inflation will cool.
Of course, the situation in Ukraine is a risk, as are looming labour disputes, border blockades and climate-related events, like the wildfires and flooding last year in British Columbia. But, as economists are fond of saying, and as you’ve heard here many times, the best cure for high prices is usually high prices.
The more immediate concern comes from how central banks might respond to inflation, or even from what central bankers might do in order to prevent inflationary expectations from taking hold...
This was excertped from a 17 March 2022 commentary by Stuart Bergman Interim Chief Economist and Vice-President, Export Development Canada.