Bank of Canada: Wage Growth So High, It’s Causing Inflation

The Bank of Canada is in a tough spot. With inflation at a 40-year high and wage growth accelerating, the central bank is under pressure to raise interest rates aggressively. But doing so risks pushing the economy into a recession. The latest jobs report showed that the Canadian economy added 337,000 jobs in August, the largest increase on record. The unemployment rate fell to 5.4%, the lowest level since 1976. But the good news didn’t come alone. Average hourly wages rose 5.4% from a year ago, the fastest pace since 1997. That’s good for workers, but it’s bad for the Bank of Canada. High wage growth is putting upward pressure on inflation. When wages rise, businesses often pass the higher costs on to consumers in the form of higher prices. This can lead to a vicious cycle of inflation and wage growth, which is difficult to break. The Bank of Canada is trying to break that cycle by raising interest rates. Higher interest rates make it more expensive for businesses to bo