Marketing Info

Inflation rises again due to increasing domestic and global pressure

“Many sources of upward pressure on prices in Canada are global, reflecting a mismatch between strong demand for goods and the global economy’s ability to supply,” Marple said.

He highlighted housing inflation as an exception, as stubborn and persistently high valuations in properties include domestic market forces “directly related to the Bank of Canada’s policy stance” and extreme weather driving up insurance prices.

The foamy housing market is closely watched, he said, as high home debt threatens financial vulnerabilities, which could challenge the ability of central bank officials to maintain price stability through monetary policy in the future.

He said the strength in the labor market as well as the number of vacancies employers are facing in trying to fill vacancies shows that the Canadian economy is operating at or near its productive capacity. He cited the BoC’s recent Business Outlook Survey, which showed those conditions are increasingly turning out to be predictable.

“Inflation is likely to moderate over the next year, but achieving this will require tighter financial conditions and rate hikes by the Bank of Canada,” Marple said. “The process is likely to begin this year, but bringing inflation back to 2% is likely to be a multi-year project.”

Leave a Reply

Your email address will not be published.

Back to top button