Interest rates

RBC CEO calls for ‘quick action’ on interest rates to control inflation

Says that several rate hikes are needed to fight “permanent and sustained” inflation

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Royal Bank of Canada CEO Dave McKay said the country’s central bank needs to take “quick action” with multiple interest rate hikes to bring inflation under control.

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Speaking in an interview with Bloomberg News on Tuesday, McKay said he didn’t think the recent acceleration in inflation was transitory. He sees some signs of a wage-price cycle that has already driven costs up permanently.

“We never really backed down as a company and cut wages because inflation was temporary,” said McKay, 58. “This is permanent, sustained inflation that needs to be addressed through monetary policy, so we need swift action this spring in the form of a series of rate hikes to address it.”

McKay’s comments illustrate how inflation, along with labor shortages, rising wages and housing affordability, have become of major concern to the country’s leaders. The inflation rate in Canada has hovered around 5% in recent months, levels not seen since 2003.

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Support for higher rates is all the more important as the country’s households are among the most indebted in the world and will be stifled by rising borrowing costs – a concern McKay also highlighted in the interview.

But the banker cautioned against attributing the country’s skyrocketing housing costs to its high levels of immigration, given the need for new sources of labor.

“We had better find a way to accommodate” population growth, said McKay, whose bank is Canada’s largest in terms of market value. “Because if we don’t find a way to accommodate it thanks to the housing stock, then it could be the opposite: we are not attracting immigrants because the cost of living and the quality of life there. are not. It would be the worst outcome in the end for people to choose to go to other markets because of their quality of life. “