We knew it was coming, but it is still eyebrow-raising to see the national inflation rate hit 5.7% in February. Here in Alberta, the rate was slightly lower, but still high at 5.5%.
The last time inflation was this high in Alberta was April 2007.
Driven by pre-existing factors related to the pandemic and exacerbated by the Russian invasion of Ukraine, the elevated level of the Consumer Price Index is setting the stage for additional interest rate hikes by the Bank of Canada.
It doesn’t help consumers who are paying more for energy and food, but tracking “core inflation” (which excludes the typically more volatile categories of energy and food) helps us get a sense if the economy is overheating in ways monetary policy can actually address. Raising interest rates won’t, for example, have much of an impact on oil prices driven by the Russian invasion of Ukraine and the will-they-or-won't-they status of the Iran nuclear deal.
At 3.9% in February, core inflation in Canada is also well above the Bank of Canada’s target range of 1-3% and reinforces the likelihood of interest rate increases. Core inflation in Alberta was also running hot at 3.1% in February.
There is still a chance that price pressures could—as originally forecast by the Bank of Canada—ease over the course of the year, but this is dependent on a relatively swift resolution to the geopolitical morass Russia’s actions have created.
Answer to the previous trivia question: According to the International Organization of Motor Vehicle Manufacturers, 80.2 million new motor vehicles were manufactured globally in 2021. Today’s trivia question: Gold is a highly pliable metal. How many miles can an ounce of gold be stretched into?
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