Inflation slows to 6.9%, still far too fast for the Bank of Canada

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Statistics Canada’s consumer price index, the country’s main gauge of inflation, rose 6.9% in September from a year earlier, compared to 7% the previous month, which suggests that inflationary pressures are easing, albeit slowly. Here’s what you need to know:

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Year-over-year increases in the consumer price index have now fallen for three consecutive months, although inflation still appears to be spreading to other sectors of the economy.

Lower gasoline prices account for most of the decline; they or they only increased by 13.2% compared to September 2021, compared to an annual increase of 22.1% in August.

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Food costs jumped 11.1%, the highest since August 1981, driven by higher prices for baked goods, fresh vegetables and meat, according to Statistics Canada. The agency attributed the increase to bad weather, rising fertilizer and natural gas prices and « geopolitical instability » resulting from Russia’s invasion of Ukraine.

Excluding food and energy, inflation rose to 5.4% year-on-year, from 5.3% the previous month, suggesting that the initial shock from soaring commodity prices and bottlenecks supply crunch in the pandemic era ripples through the entire economy. Prices for passenger vehicles rose 8.4% and furniture cost 13.3% more than in September 2021.

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The context

The Bank of Canada aims to keep year-over-year increases in the consumer price index in the 1% to 3% zone by targeting the midpoint of 2%.

Inflation broke out of this range in April 2021 and has never looked back. Annual increases peaked at 8.1% in June, the largest in four decades, as gasoline prices, dwindling stocks of basic food items, global supply disruptions, overheating Housing markets and a post-pandemic surge in demand have combined to create a perfect storm of inflationary pressures. .

It is a global phenomenon that is more acute in some places than in Canada. The United Kingdom announced on October 10 that its consumer price index rose by 10.1% in September compared to the previous year.

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At the end of the line

The evidence that inflationary pressures are easing is positive. However, prices continue to rise faster than wages, so households will continue to feel stuck and politicians and policymakers will continue to feel compelled to act. Bank of Canada leaders have made it clear that they are not done raising interest rates to stifle “excess demand”. The latest reading of inflation will strengthen their resolve.

• Email: kcarmichael@postmedia.com | Twitter: carmichaelkevin