As Canadian price rises hit 7.7%, could inflation be reaching its peak?
CBC
If there is anything we've learned over the past year it's that central banks are pretty bad at predicting inflation. Which may be a reason for hope.
When Bank of Canada Senior Deputy Governor Carolyn Rogers warned on Wednesday — the same day Statistics Canada inflation data shocked nearly everyone with a jump to levels not seen since 1983 — that there is worse inflation ahead, she may or may not be right. After failing to foresee the current spurt of inflation, the bank's record speaks for itself.
"We know inflation is keeping Canadians up at night. It's keeping us up at night, and we will not rest easy until we get it back down to target," said Rogers as part of a fireside chat organized by the Globe and Mail on one of the hottest days of the year so far.
That is why, she said, the Bank of Canada is raising rates "quite aggressively."
WATCH | Businesses, consumers struggle to cope with inflation:
Rogers and the Bank of Canada are by no means alone in seeing a gloomy future where prices keep rising ("team transitory has disbanded," quipped Rogers). But there are other voices, and it might just be time to look for signs of a bit of optimism, if just on the principle that it is always darkest before the dawn.
Because unless you are convinced that inflation is permanently out of control and the price of everything will keep rising forever, inflation must be ultimately transitory at some point. The question is: when is that point?
A British rail strike and new data showing Canadians really are increasingly expecting inflation to persist are worrying indicators of what the future may hold. But just this week there have been counter-signals that some of the main drivers of inflation — food, oil and supply-chain disruptions — may be starting to heal themselves.
Meanwhile, though retail sales have not yet seen a strong impact from the rising cost of borrowing imposed by central bank rate hikes, Canadian real estate has — something Rogers observed from the heat of her imaginary fireside.
To look at the gloomy perspective first, the strike that shut down transport across Britain is a potential warning of the kinds of forces that could push wages, and therefore prices, higher.
"Our campaign will run for as long as it needs to run," Mick Lynch, secretary general of Britain's Rail, Maritime and Transport Workers, said this week. With a management wage offer of three per cent amidst inflation above nine per cent, there are fears the transport strike could begin a new "summer of discontent," as public sector unions, including the health sector, battle to regain lost spending power.
So far there are few signs of that kind of disruptive labour action in Canada, and governments may decide to try to placate workers before it gets that far. Federally regulated dairy farmers, for example, have been granted a mid-year price increase.
As Rogers reiterated on Wednesday, inflationary expectations, the conviction by workers and businesses that prices will keep going up, are one of the things central banks fear the most.
A recent report from the Conference Board of Canada offers some good news and bad news on that front. Fresh June data shows Canadian expectations for one year ahead "popped upward," but three-year expectations declined, showing that many Canadians may still be on team transitory.
