this post was submitted on 03 Sep 2023
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Higher interest rates lower inflation. That is why the BOC has been rising them
The main goal of central banks is keeping inflation around 2% per year, even if that causes a recession.
Interest rates don't unilaterally fix inflation though, which the BoC is either too stupid to admit or too reckless to care.
Raising interest rates won't fix inflation driven by gas prices.
Raising interest rates will not reduce the price of gas. However, it will reduce inflation in other ways. Higher interest rates decrease the demand for credit and encourages people to pay back their debts faster, if they can. This deleveraging reduces economic activity in other areas, easing demand and thus reducing inflation.
I am not an economist, but I won't pretend to know more than the BoC either.
I wouldn't undercut yourself so much - they have more experience but every situation is different. Inflation in July was largely due to increased mortgage payments (2.4% if you exclude mortgage increases from rate increases). So when the only knob they have can also cause a bigger issue, it's fair to criticize that they are just going with the flow and praying. If you jump from 0.25 to 5 in such a short time frame, you just worsened inflation on mortgages while improving everything else to the point where it might all cancel out.
They are absolutely flying by the seat of their pants and throwing the average worker under the bus.