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Interest rates are higher than they should be due to government spending: Scotiabank

Canadian interest rates are 200 basis points higher due to government spending, including pandemic relief. A Scotiabank report states that fiscal policy has complicated monetary policy, resulting in higher interest rates. The report calculates that 200 basis points of the rate increases were necessary to counter government spending. The authors criticize the size and duration of pandemic relief measures, stating that fiscal policy was mis-calibrated. They emphasize the need to avoid repeating these mistakes in future budgets.

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