GA - The Monthly with host Peter Kent and guests Steve Ambler and Jeremy Kronick from CD Howe

How did the Bank of Canada get inflation so wrong? One explanation for the misjudgment – like many central banks – is that they took their eye off of tightly managing the money supply.  With inflation now well above the 2% target, last week’s whopping 1% policy rate increase – not seen since the 08/09 Great Financial Crisis – caught most of us off-guard.  Tom Keene, with Bloomberg Surveillance is calling it the biggest shock of the week, leading to the opening of the flood gates.

 Steve Ambler and Jeremy Kronick took a look at the data (link). They found evidence that there is still a valid and reliable relationship between the long-term trend in money supply growth and inflation – arguing (link) that unprecedented money growth during the pandemic is still fueling high inflation.