A new report suggests that the Canadian unemployment rate will likely not spark inflation in the near future.
The report, issued this month by the Canadian Imperial Bank of Commerce, suggests that there is still plenty of breathing room in terms of jobless rates before the Bank of Canada would have to step in and raise interest rates.
“Demographic and public policy changes in recent years have lowered the non-inflationary rate of unemployment,” said CIBC chief economist Avery Shenfeld upon release of the study. “That will allow the Bank of Canada to keep rates low for long, and press ahead towards further labour market improvements.”
In other words, say experts, the concept of “full employment” is changing, as the central bank now has more room to sit back on interest rates than ever before. Shenfeld asserts that such a shift works in favour of those who are seeking work in this competitive labour market.
The authors of the study predict that there will be no change in the Bank of Canada rates until 2015, due to a variety of factors including unemployment benefits and weakening of unions.
Meanwhile the European Central Bank is cutting their interest rate to a record-low 0.25 percent, as unemployment rates sit at record highs with little forecast for job growth. The U.S. economy reported better numbers than expected, with GDP outpacing predictions from Wall Street.
Source: Globe and Mail