Canada’s inflation rate is now 7.7%, its highest point since 1983

Canada’s inflation rate rose at its fastest pace in nearly 40 years during the year to May, as the price of almost everything continues to rise rapidly.

Statistics Canada reported on Wednesday that a rise in the price of gasoline was a major factor in bringing the global inflation rate to 7.7%. The price of gas rose 12 percent in May alone and has risen 48 percent from a year ago.

Food prices were also a major factor in the rise, as grocery bills rose 9.7% last year. Within the food category, the cost of edible fats and oils soared by 30 percent, the fastest increase on record.

The invasion of Ukraine by Russia is a major factor in this rise, as Ukraine is one of the world’s leading suppliers of sunflower oil, and the war has led to a shortage of pantry commodities.

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The cost of home furniture is also rising at a record high, with furniture prices rising 15.8 percent last year, mainly due to higher entry and shipping costs. A major factor in this increase was the start of tariffs of up to 300 percent on some upholstered furniture in Vietnam and China from last year, CBC News reported.

Increase higher than expected

Economists had expected the rate to rise from a 30-year high of 6.8 percent in April, but May figures exceeded those expectations. Prices rose 1.4% in May alone. Seasonally adjusted, this makes May 2022 the biggest one-month jump in the inflation rate in 30 years.

“If you’re not over 40, you’ve never experienced inflation like this, and unfortunately we don’t expect much rest in the future,” said TD Bank economist Leslie Preston. “Inflation is expected to remain high until 2022.”

The inflation rate rose in all provinces, from a low of 7% in Saskatchewan to 11.1% on Prince Edward Island.

The price of food purchased at grocery stores rose 9.7 percent last year, according to Statistics Canada. (Ivanoh Demers / Radio-Canada)

Consumers are feeling the pinch. Laura-Marie Paynter, a single mother from Toronto, recently got a second job to provide extra income for herself and her teenage daughter, but has found that jobs have added to her costs in the form of having to pay more for transportation. , and having to order food because he is not home to cook so much.

“It’s frustrating that I have to take time out of my house and my son to keep things in the fridge and a roof over our heads,” he told the CBC in an interview.

Canada is not the only country that has faced inflation at its highest level in decades. In the US, the inflation rate is over 8% right now, and new data from the UK shows that the cost of living is up 9% a year.

While Canada’s inflation rate is rising rapidly anyway, Statistics Canada has made some changes recently in the way it figures the figures, giving more weight to things like housing and adding the cost of new and used vehicles. to its official index for the first time.

According to data agency calculations, the cost of acquiring a passenger vehicle rose 6.8 percent last year. Although it is lower than the general inflation rate, it was nonetheless one of the main factors contributing to the higher global rise, Statscan said.

Bank of Canada is now more likely to raise lending rates

Higher-than-expected inflation figures make it almost certain that the Bank of Canada will raise its benchmark interest rate by three-quarters of a percentage point at its next policy meeting in July, in an attempt to curb inflation. uncontrolled price increases.

The central bank reduced its lending rate to 0.25 percent in early 2020 to stimulate the economy during the pandemic, but in recent months has moved aggressively to raise rates. Another 75-point increase would bring the bank’s key lending rate to 2.25 percent, the highest since the 2008 financial crisis.

While higher borrowing costs are likely to bring down inflation over time, the impact is unlikely to be rapid, said Canadian Chamber of Commerce economist Kiefer Van Mulligen. consumers and policymakers should prepare for high prices.

“Interest rates started to rise in March, but monetary policy is not working overnight,” he said. “[And] higher interest rates cannot do much to address some of the most critical causes of current inflation, such as supply chain problems. “

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