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Inflation Fighters, Dehumidifiers and Truck Drivers: Ben Tal’s Economic Outlook
November 22, 2022 4 Minute Read
On November 17th, over 800 commercial real estate professionals and business leaders gathered in Halifax for an update on the economy and to hear the outlook for commercial property at CBRE’s Atlantic Canada Market Outlook. A highlight was the interview between Benjamin Tal, one of Canada’s most sought-after economists, and CBRE’s Vice Chairman, Paul Morassutti.
While there is no shortage of negative headlines these days, Tal offered some optimism.
“I believe we are much closer to the end of rising interest rates than the beginning. The inflation story is going to ease and the supply chain story is going to ease”
Even with that positive outlook, Tal noted that there was a 25% risk of inflation remaining sticky due to ongoing supply chain issues. That could cause the Bank of Canada to overshoot with interest rate hikes and further slow the Canadian economy.
Over the long term, while a return to a low growth economy likely awaits Canadians, interest rates will never be as low as they were during the pandemic.
“Today, everything is upside down,” said Tal. “We have deglobalization, just-in-case inventory and we have a situation where the labour market is not cheap or available. All of those inflationary forces are there and interest rates have to be higher than before to keep inflation at bay. So yes, higher interest rates, but not high interest rates.”
Another tug of war shaping the economic outlook is between government spending, which remains elevated, and the Bank of Canada’s monetary policy.
“If you look at spending, it’s rising a bit too strongly for my taste. If you have fiscal policy rising and monetary policy trying to slow the economy it’s like putting a humidifier and dehumidifier in the same room and seeing who is going to win,” Tal said. “If you go back to the 1980s when they won the war against inflation, it didn’t happen until fiscal policy joined the battle.”
For Tal’s take on ESG, the green transition’s impact on Canadian oil and gas, and the housing affordability crisis, watch the full interview:
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