John Manley joins BNN Bloomberg to discuss Canada's latest GDP data, the effects of inflation and why the Bank of Canada's independence is "fundamentally crucial" for confidence in the country's economy.
He talks about the challenges the Bank of Canada is facing, saying that monetary policy is hard to calibrate. It can be easy to overshoot one way or the other and the economy doesn't respond immediately to interest rate changes. The Bank is always concerned about expectations in the economy, as consumer and business behaviour will change if they see inflation as a given.
John also points out that monetary policy is only effective on the demand side. A lot of the inflationary pressure Canada is facing right now is on the supply side, such as the aftermath of the pandemic, continuing restrictions in China and difficulties with supply chains.