Heading into this week’s federal budget, one question loomed large: would new spending fuel inflation and make it harder for the Bank of Canada to start cutting interest rates?
The budget lays out plans to spend nearly half a trillion dollars in taxpayer money. The new spending in the document is modest by comparison — $52.9 billion. But it’s still new money being poured into an economy fighting to get inflation back under control.
Economists say the spending announced this week in Ottawa won’t necessarily change the forecast that assumes the year-over-year rate of inflation will come down to 2.5 per cent by the end of this year, and all the way to the 2 per cent target by the end of 2025.
“But spending is spending,” Desjardins chief economist Jimmy Jean told CBC News.
While spending money now on new housing will bring down shelter inflation in the years to come, he said, “in the…
