Inflation Erasing Pandemic Savings, Says CEO of National Bank of Canada

A new spate of interest rate increases and more inflation may erase the savings that consumers built up during the pandemic, a report from Bloomberg said.

The report noted that National Bank of Canada CEO Laurent Ferreira said this would likely come in 2023, a full year before he anticipated it.

He said there were serious risks to the “Goldilocks scenario” of slow rate increases and a soft landing for the economy to help out commercial banks.

He said central banks might rack up rates too quick while not controlling inflation — and the Russian war in Ukraine has exacerbated that.

“The liquidity buffer that households have built up during the pandemic will shrink much faster,” Ferreira said, according to the report. “We have increases in interest rates that we knew were coming and that will start creeping up in mortgage payments. But now you have inflation, notably energy and food, that’s hitting consumers hard.”

National Bank is reportedly telling business clients to boost their expectations for inflation and look at their liquidity reserves.

See also: New Study Shows Consumers Taking Digital Habits In-Store

While rate increases haven’t damaged demand yet, a recent jump in market volatility could put a pause on dealmaking activity and IPOs.

PYMNTS wrote that American consumers have been shifting habits in shopping as the pandemic continues, particularly as the country continues to adapt to a new way of life.

Consumers now show a taste for omnichannel shopping that began as a necessity, showing them how it can be quicker and more convenient.

The report says a larger number of shoppers have been using curbside shopping, which has been seeing them driving to the store but not necessarily walking inside.

According to the report, 47% of consumers picking up orders in the store buy more products through entering to make their pickup, while 28% outside the U.S. buy more products on trips to pick up eCommerce orders inside physical stores.