Everyone seems to be talking about inflation more than ever these days. And while Inflation in Canada has come down a little recently, it remains far too high. After rising rapidly to reach 8.1% in June, inflation as measured by the consumer price index (CPI) was 7.6% in July. To put this into perspective, the Bank of Canada’s target rate is 2%.
The good news is that it looks like inflation may have peaked.
The bad news is that inflation will likely remain too high for some time, said Bank of Canada Governor Tiff Macklem recently in a newspaper opinion piece.
Highlights include:
- The Bank of Canada is determined to get inflation back to the target rate of 2%, which will likely mean more interest rate increases (rates sat at record lows for quite some time before they began rising in March)
- With higher mortgage costs, housing activity has slowed quickly after unsustainable growth during the pandemic, and housing prices are moderating. As housing slows, peoples’ spending on housing-related goods and services, such as renovations and appliances and furniture, should also slow
- Prices for more than half of the goods and services that make up the CPI basket are still rising faster than 5%
- The price of gasoline, which has contributed about one-fifth of overall inflation in recent months, declined from an average of $2.07 a litre in June to $1.88 a litre in July
- Prices of some key agricultural commodities, like wheat, have also eased and global shipping costs have fallen from exceptionally high levels. If these trends persist, inflation will continue to ease
- Many of the global factors that have pushed up inflation won’t go away quickly – supply chain disruptions continue, geopolitical tensions are high and commodity prices remain volatile
- Here at home, our economy has been running too hot. As Canadians finally enjoy a fully reopened economy, they want to buy more goods and services than our economy can produce. Businesses are having trouble keeping up with demand, and that’s leading to delays and higher prices. The result is broad-based inflation
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