Ottawa faces pressure to help struggling Canadians as inflation eases

The Bank of Canada has said persistently strong wage growth will make getting back to the two per cent inflation target difficult.

Canada’s inflation rate likely took another dip last month, but with many Canadians still struggling with the cost of living, the federal government is facing pressure to deliver more help in the upcoming budget.

Statistics Canada is set to release its February consumer price index report on Tuesday, giving its most up-to-date reading on inflation ahead of the federal government’s budget on March 28.

Desjardins and RBC are both forecasting the inflation rate fell to 5.4 per cent last month, down from 5.9 per cent in January.

But even as inflation eases, the federal government has signalled the budget will include affordability measures to help Canadians still challenged by the cost-of-living.

Desjardins’ chief economist Jimmy Jean said all eyes are on Ottawa to balance affordability priorities with fiscal restraint.

“One of the things we obviously are going to watch is what governments put forward to help with cost of living, all with the constraint that it must not add fuel to the fire (of inflation),” Jean said.

The Bank of Canada has been laser-focused on bringing inflation back down to its two per cent target. Its aggressive rate hike cycle over the last year is starting to slow the economy by forcing people and businesses to pull back on spending.

As the economy slows, economists worry excessive or untargeted measures by the federal government could work against the central bank’s efforts and force it to raise interest rates even higher.