Broad upward price pressures drove Canada’s annual inflation rate to speed up. Data on Wednesday showed it accelerated to an 18-year-high in August. This was ahead of a federal election that is expected to oust Prime Minister Justin Trudeau’s Liberals.
In August, the rate rose to 4.1%, the fastest since March 2003, and beating analyst estimates. This statement from Statistics Canada gave an opportunity for Trudeau’s main rival to pounce over the issue.
Erin O’Toole, leader of the main opposition Conservatives said the numbers released today make it clear that under Justin Trudeau, Canadians are experiencing an affordability crisis.
According to a poll, the Conservatives have a narrow lead over Trudeau’s Liberals. It was at 31.2% to 30.5% and just less than a week before the Sept. 20 elections. In third were the New Democrats at 21.4%.
Around the world, countries are struggling with high inflation amid supply chain hurdles and labor shortages. The easing and tightening of restrictions with each new wave of the virus leads to unstable demand and supply bottlenecks.
The Bank of Canada (BoC) said it expects headline inflation to remain above its 1%-3% control range this year. That would be before it eases back to the 2% target in 2022.
‘Tripod of Angst’
Former Bank of Canada governor Stephen Poloz spent seven years with the central bank until 2020. He said many Canadians are “understandably distraught” by the handling of federal finances.
In an interview on Tuesday, Poloz said there is a sort of tripod of angst among regular folks: high government debt, the possibility that they’ll have higher taxes, and higher inflation connected to that debt. People need some reassurances, he added.
Poloz disproves fears of runaway inflation, saying there is a reason why it hasn’t been an issue for people for nearly 30 years and suddenly it is.
While prices have in fact risen significantly over the past year, that’s only a natural trajectory and shouldn’t be conflated with woes of inflation, he said.
Prices have risen, as they should, he said, when demand exceeds supply. Some wages have gone up, and that should also happen when demand exceeds supply,the former bank governor said.
He also said, there are also supply chain concerns that add to price increases, given that Canada’s economy is “far more trade-dependent than almost every other major economy. They can point to specific things, he said, and they can explain them, but those things don’t add up to a persistent inflation. What they add up to is a higher price here and there, he added.