Monetary policy is not done. That is the key takeaway from the April 12th Bank of Canada press conference following their decision to hold its key interest rate at 4.5%. This is the second consecutive pause for the Bank of Canada, and if you’re in the camp that’s hoping for, or projecting a rate cut later this year, Governor Tiff Macklem swiftly squashed that idea saying, that it “doesn’t look like the most likely scenario.” Joining us today to unpack what the latest Bank of Canada decision means for growth, housing, and the real economy is renowned economist Don Drummond. Don has held several senior roles at the Federal Department of Finance where he was responsible for economic analysis, fiscal and tax policies. He later served as Senior Vice President and Chief Economist at TD Bank, and is currently Fellow-in-Residence at the C.D. Howe Institute. Don speaks with host Pamela Ritchie today, and he is not surprised by the Bank of Canada’s decision, since they’re far from getting inflation down to 2%. However, he says “pleasantly surprised” they communicated that further hikes are a possibility in the future, and put an end to the speculation that cuts could be coming in 2023. We also hear today from Don that globalisation, including companies lowering costs by moving production overseas, allowed us to keep inflation low with strong growth in the past, but a lot of that has run its course for the moment. Don believes 1.5-1.7% is a reasonable sustainable long-term growth rate.

Recorded on April 13, 2023.

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