Omicron and the Economy.

Once this new wave has passed, we must ask ourselves how the Omicron variant will affect the economy, interest rates and inflation. Here are the opinions of several Quebec economists.

"I remain confident about our economic forecasts, but the uncertainty has just gone up a notch," acknowledges Matthieu Arseneau, assistant chief economist at the National Bank.

 "It's a big risk, but it's hard to see which way it's going to go at the moment," says Robert Hogue, an economist at the Royal Bank.

Benoit Durocher, a senior economist at the Desjardins Group, believes that the Omicron variant will slow down the recovery of the Quebec and Canadian economies. It puts more sand in the gears. It will slow down, but to what extent? At the same time, this is a film we've seen before. There will be an increase in cases and then a decrease in the spring.

In fact, it all depends on the extent of the restrictions and their duration. If the measures announced by the Legault government were to become more extensive, the economy would eventually suffer. And even more so, of course, if other provinces or countries followed suit, such as Ontario. A series of global restrictions could slow the recovery of supply chains, which has an impact on the level of consumer prices.

Note that sectors that will suffer, such as restaurants and the arts and entertainment industry, will have the financial support of the Quebec and Canadian governments. In addition, consumers will spend money elsewhere that they used to spend in these sectors, partially offsetting the negative economic impact of the restrictions. Remember the renovation boom in 2021.

The Bank of Canada is planning 5 interest rate hikes in 2022, which would take it from 0.25% today to 1.5% by the end of 2022, the same level as before the pandemic.

Other central banks have begun to raise their interest rates, such as the Bank of England, or have announced hikes for 2022, such as the US Federal Reserve. But what will happen if the economic recovery is held back by the consequences of the Omicron variant? What will the Bank of Canada do if unemployment rises but inflation remains high?

Interview by La Presse.