Inflation is cooling. The cost of living crisis is not

Inflation appears to be coming back to earth. That appears to give the Bank of Canada enough wiggle room to pause its series of interest rate hikes. So, for the first time in a long time, Canadians can find some reason to believe the worst of the cost of living crisis is behind them.

"Given that inflation is the most lagging of indicators, and the economy is clearly weakening, we're likely to see ongoing disinflationary pressure.... There's no need for further rate hikes in Canada," said Benjamin Reitzes, senior economist at the Bank of Montreal.

But there's a big difference between "things not getting worse" and "things getting better."

Prices for just about everything are a lot higher than they were a couple of years ago. And while there has been widespread progress to bring price growth to heel, many categories continue to climb every month.

Year over year, the cost of groceries is up 5.8 per cent. That's down from more than 11 per cent this time last year, but still a substantial increase for households that are already stretched thin.

"We have seen the annual rate of inflation has started to come down, but that doesn't mean that the level of prices is not [still] unaffordable for a lot of people," said CIBC senior economist Andrew Grantham.

"Lets take for example, car prices. That's one of the things that is decelerating relative to a year ago, but car prices are still 10 per cent higher than they were two years ago," Grantham told CBC News.

Even once inflation gets back down to the Bank of Canada's two per cent target, that doesn't mean prices are going down. It simply means that prices will continue to rise from where they are now, just at a more manageable pace.

And not every component is seeing progress.

"Move over grocery prices. Rents may now be the biggest concern on the Canadian inflation front," wrote BMO's chief economist Douglas Porter.

He says Canadians are experiencing the fastest rent increase in just over 40 years.

"And this component has legs, as the rental market is showing precisely zero signs of cooling off," he wrote in a note to clients.

On the real estate front, the picture is even gloomier. Sure, the average price of a home has fallen from the peak. The Canadian Real Estate Association says the national benchmark price of a home in March of 2022 was $855,800. 

Last month that average benchmark price had fallen to $741,400. But that's still up more than 40 per cent from price levels at the end of 2019.