Rising interest rates will increase borrowing costs and slow the economy. But they won't address one of the biggest drivers of inflation: fossil fuel costs.
Inflation numbers in Canada released last month laid the facts out for all to see. Overall, the consumer price index was up by 6.8 per cent from the year before; 1.8 percentage points of this was due to energy overall, while 1.3 percentage points of it was due to gasoline alone.
Economists often say the cure for high prices is high prices. Sure, oil companies are making record profits with the cost per barrel hovering around $110 US. But they know they could produce more oil and make even more money — and that supply could bring prices down.
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