Canadian prices, as measured by the Consumer Price Index (CPI), rose 5.7% on a year-over-year basis in February, up from 5.1% in January. This was the largest gain since August 1991 (+6.0%). According to Statistics Canada, price rises were broad-based, with groceries up 7.4% year over year, gasoline up 32.2%, and shelter costs up 6.6%. Excluding gasoline, the CPI rose 4.7% year over year in February. The Bank of Canada's preferred measures of core inflation (which use techniques to strip out volatile elements) rose an average of 3.5% year-over-year in February. In BC, consumer prices rose 4.7% year-over-year in February.
Tightening monetary policy by the Bank of Canada should slow demand and help to bring inflation down, though that will take time and rising oil and commodity prices caused by the Russian invasion of Ukraine presents a risk of high inflation persisting longer than expected. Volatility in global financial markets briefly interrupted the upward march of long-term interest rates, however bond markets are once again pricing in an aggressively inflation-fighting Bank of Canada. We expect the Bank will increase its overnight rate five more times over the next year, bringing its key policy rate to 1.75 per cent before pausing to assess the impact of higher interest rates on the economy.
For more information, please contact: Gino Pezzani.
Canadian Inflation (February 2022) - March, 2022
Posted in March Newsletter 2022