Wild swings in the markets have caught many veteran economic forecasters off-guard, but a group of Canadian CEOs weighed in recently with their views on exchange rates and inflation in a poll conducted by COMPAS Inc.
The 119 respondents were asked to predict the rate of inflation in the U.S. The average of their responses indicated they believe it will be 4% next year and 5.3% in 2011. Most of the CEOs think Canada’s inflation rate will be lower because domestic spending, along with our money supply, are not keeping pace with the rate of U.S. increases. Only 23% of the respondents believe the Bank of Canada will ensure our inflation rate matches the U.S. rate to prevent our exports from being priced out of the American market.
“Although central banks have learned from the pain caused by high inflation in past years, they will not be able to offset the increase in interest costs due to all the money that has been and will be printed,” wrote one respondent. “U.S. debt will need to pay higher interest rates, and as such, everything will go up.”
The panelists also believe the Canadian dollar, which hit 92¢US today, will be worth 90¢US by the end of year, not far from what they believe is the ideal value of the loonie (87¢US) for business.