By raising interest rates, the governor of the Bank of Canada has made a mistake. He got an easy question wrong. Is the economy expanding or contracting? He called it expansion, meaning output is growing, putting upward pressure on prices. The increase of 0.25 per cent in the overnight lending rate of the bank signals the beginning of a cycle of increases that will push all interest rates in Canada up over the next 18 months by as much as two percentage points.
World economic signs signal deflation meaning slower output, and faltering employment.
Inflation calls for interest rate increases, and government spending cuts. Deflation means no interest rate hikes, and government spending increases.