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What Canada’s record inflation means for your budget, why it’s happening, where you’ll feel it and what lies ahead


It may not come as a surprise, but it will worry most Canadians: Inflation is at its highest level since 1991, hitting 6.7% in March as food and gas prices soared.

As the war in Ukraine rages and supply chain issues persist, prices at the gas pump are up 39.8% from March 2021. Month-over-month, prices increased by nearly 12%. According to Statistics Canada, without the rise in gas prices, the inflation rate in March would have been 5.5% instead of 6.7%.

What is growing fastest, and why?

The war is responsible for rising gasoline and food prices, according to Statistics Canada — grain prices, for example, rose at the fastest annual rate since 1990, at 12.3%.

Rising gas prices are making life more expensive everywhere, said Aaron Wudrick of the Maconald-Laurier Institute. months of wear.

“Eventually, prices are going to have to go up.”

The price of pasta is up almost 18% year over year. Russia and Ukraine are the world’s two largest wheat exporters.

Overall, food prices also skyrocketed in March. Grocery store prices rose 8.7% from March 2021, in part due to the largest annual increases in dairy and egg prices since 1983.

Meat products in particular have been hit by supply chain issues, Wudrick said, rising 10.5% year-on-year – vegetarians and vegans will have plenty to brag about in 2022 while everyone is trying to cut costs at the meat counter.

What is the Bank of Canada doing to slow this train down?

The Bank of Canada is trying to keep pace, raising its key rate by three-quarters of a percentage point since the start of the year in a bid to calm the waters. The bank is expected to continue to increase this rate as the year progresses.

And as interest rates rise, Canada is approaching a tipping point in its housing market, Wudrick said — those who own homes will feel the pinch, but those who want to own homes will demand policies that cool the real estate frenzy.

“There has to be accountability at some point,” Wudrick said.

The only question, he said, is how quickly or quickly that judgment comes.

The Bank of Canada’s next rate hike will give us a better idea of ​​the institution’s outlook, Wudrick said — another 0.5% hike will signal the urgency of getting inflation under control.

What else is getting more expensive?

Prices for other goods also rose in March. For example, passenger car prices increased by 7% and furniture prices by nearly 14%.

And as Canadians start to travel and get out again, the price of these experiences is also rising, with dining costs rising 5.4% year-over-year.

Transportation industry prices could rise a bit more slowly as companies choose to take a cut to avoid sticker shock from returning customers, Wudrick said.

Will my salary ever catch up?

Wages generally lag behind inflation, so consumers will notice that these increases eat away at their purchasing power; in March, the average hourly wage increased by 3.4%.

While some may take this opportunity to buy before prices continue to rise, many will tighten their purse strings, Wudrick said.

That means your salary won’t stretch that far, so budget and save where you can, Wudrick said. And buckle up – this roller coaster is going to be going up for the foreseeable future.

With files from The Canadian Press

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