Inflation rises again in Canada

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Canada’s main inflation rate rose 6.8 percent in April from a year earlier, one of the fastest rates in the early 1980s. Here’s what you need to know.

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How bad is it?

Not as bad as in the United Kingdom, where inflation rose to 9 percent in April, according to figures released before the new Canadian numbers.

But headline inflation at 6.8 percent is still pretty bad. In January 1991, the consumer price index rose year-on-year to 6.9 percent, and for most of that year it was close to six percent. Otherwise inflation has not been so hot since the early 1980s.

There is some evidence that growth is slowing. The headline count was 6.7 percent in March, representing a dramatic increase from 5.7 percent in February and 5.1 percent in January.

What is the reason for this?

For the same reasons, inflation rose from the Bank of Canada’s Comfort Zone in April 2021 to one percent to three percent: commodity prices and housing costs.

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Gasoline prices were 36-percent higher than in April 2021, according to Statistics Canada. The agency measures how much it would cost homeowners to replace their existing homes if they were to buy at current prices, an increase of about 17 percent, and the cost of ordinary homes increased by 13 percent. Automobile prices and other major drivers of restaurant food.

Is everything more expensive?

Not everything. Mortgage fees and telephone services are lower, and travel expenses are down 18.6 percent from April 2021.

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Does the Bank of Canada have an answer?

Yes: high interest rates.

The Bank of Canada has acknowledged that it has misjudged upward pressure on prices. The central bank’s latest quarterly economic outlook has seen the consumer price index rise year-on-year at an average of 5.6 percent compared to the first quarter, and instead averaged 5.8 percent, the company’s current forecast for the second quarter. Inflation is hotter than policymakers expected, which means they have no choice but to take a steep path back to a higher interest rate setting. Their primary goal is to increase the consumer price index by about two percent annually. They have work to do.

Bank of Canada Governor Tiff McCallum has all said he will raise the benchmark interest rate by half a point when policymakers adjust the policy next June 1. This would push the rate lenders to 1.5 percent as a guideline for mortgage rates and other loans. , Compared to 0.25 percent at the beginning of the year.

Central bank leaders have indicated they will not stop until the target rate is reached in a “neutral” setting, which they define as something between two percent and three percent. McClellan added that he may have to keep the benchmark rate above three percent to get back to the inflation target.

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