According to Statistics Canada, the annual inflation rate in November stood at 4.7%

OTTAWA – The man at the head of the Bank of Canada says the central bank has become uncomfortable with hot inflation numbers, which remained at an 18-year high last month, as he undertook to curb price increases.

Governor Tiff Macklem said the problem comes down to the confidence Canadians have in the Bank of Canada to ensure that the pace of price increases is not too high.

Statistics Canada reported on Wednesday that the annual pace of inflation held steady in November as the consumer price index rose 4.7 percent from a year ago.

But he also noted that high inflation is difficult for many Canadians because as the cost of living increases, households are struggling to pay their bills.

The reading landed two days after the Bank of Canada and the federal government agreed to keep the central bank’s inflation target range of one to three percent, but more formally let the bank keep an eye on the market. of work when making interest rate decisions.

In a virtual speech to the Empire Club of Canada, Macklem said the new marching orders mean the bank can sometimes let inflation be in the upper end of its target range if it helps strengthen the labor market. .

But “price stability is a job, because if we don’t do it, nothing else will work,” Macklem told reporters at a year-end press conference.

As inflation has increased, the dollars that Canadians bring home have fallen behind. Wages rose 2.8% between November 2020 and last month, meaning consumers on average saw their purchasing power drop.

Wages are generally lower than inflation, but with the tight labor market already leading to a substantial increase in wages for job seekers, the amount paid to workers may soon catch up with the pace of price increases, Tu said. Nguyen, economist at the accounting firm RSM Canada.

One of the main drivers of inflation in November was again the price of gasoline, which rose 43.6 percent from the same month a year earlier, slightly above the rise of 41 , 7 percent year over year in October.

The annual rate of inflation in November would have been 3.6% if gasoline prices had been excluded, the same as in October.

Food price increases that have grown at their fastest annual pace since January 2015 also fueled the one-time gains in the Consumer Price Index last month due to supply chain disruptions and disruptions. low crop yields.

The pinch on consumer wallets is also pushing up costs for businesses as the economy grapples with labor shortages, supply chain disruptions and renewed uncertainty around the Omicron variant, said Stephen Tapp, chief economist of the Canadian Chamber of Commerce.

“If companies start to pass these cost increases more on to their consumers, it will keep the price pressures on,” he said.

November marked eight consecutive months in which headline inflation exceeded the Bank of Canada’s target range. The race shouldn’t go on forever. CIBC chief economist Royce Mendes said price increases are expected to slow by spring, but not necessarily reverse.

“If prices stay where they are today, the headline inflation rate will slow down,” he said. “And that’s sort of what we expect, we don’t expect massive discounts at retailers.”

The average of the three measures of core inflation, which are considered to be better indicators of underlying price pressures and closely monitored by the Bank of Canada, was 2.73% for November, up slightly from through October, according to Statistics Canada. The average was last this high in November 2008.

Stephen Brown, senior Canadian economist at Capital Economics, said the increase in measures suggests inflationary pressures are widening.

The Bank of Canada does not expect a first hike in its key rate until at least April. The rate has been 0.25% since the pandemic devastated the Canadian economy almost two years ago.

Since then, employment has rebounded and the economy has nearly rocked the shock of COVID-19.

Statistics Canada also said on Wednesday that the November inflation reading was the first without special consideration for certain goods and services that were not available due to the pandemic. The agency also noted that the data is largely unaffected by the November flooding in British Columbia, as the majority of the prices were collected before they occurred.

This report by The Canadian Press was first published on December 15, 2021.