Immaculate Disinflation in Canada? Don't Count On It

David Dodge tells Bloomberg why interest rates are bound to stay higher for longer, despite market bets that the central bank will lower borrowing costs later this year. 

"There’s a lot of uncertainty out there, and our advice as a firm to our clients is don’t make all your plans on the assumption that you’re going to go back to a pre-Covid world, either on interest rates or in policy terms," he says. "Even if you use that for an optimistic case, you better hedge somehow against the potential for considerably higher interest rates."

When it comes to returning to 2% inflation, David says, "I find it difficult to think that we’re going to get there on a sustainable basis at the end of 2024 without some higher unemployment along the way or without some magic rebound in productivity. Immaculate disinflation is a strange word. But there’s a lot of underlying sense in it that it’s very hard to think that we’re going to somehow quickly get back to 2% on a continuing basis."