Op-Eds

Last week’s inflation numbers for July gave those of us who analyze the outlook for prices plenty to think about. The headline inflation number, which measures the increase in prices over the last 12 months, clocked in at an unruly 7.6 per cent, while the month-to-month inflation figure came in at a much better-behaved 0.13 per cent, which works out to an annualized 1.6 per cent, which is below the Bank of Canada’s two per cent target.

The June-to-July change was mostly driven by a fall in energy prices, which may or may not be repeated and could easily be reversed if the Russo-Ukraine war or other international conditions worsen. People understand that energy prices go up and down. But the July result does underscore the…

Two economic headlines a week apart – the Bank of Canada’s 1 per cent hike in the overnight rate last week, and the 8.1 per cent year-over-year increase in the Consumer Price Index Wednesday – make clear that we are at a major turning point. The Bank has underlined its determination to get inflation, which it admits it underestimated, back to its 2-per-cent target. Canadians can look forward to lower inflation, and also need to be ready for the recession that will precede it.

Although the Bank’s hike was larger than most forecasters expected, the June CPI report validated the big move. Canadians too young to have experienced inflation like this before are discovering what older Canadians already knew: inflation is bad. It erodes …

On Wednesday, the Bank of Canada increased the scope of its interest rate increases, raising its overnight rate target by 100 basis points to 2.5 per cent. We haven’t seen a hike that big in recent memory, and the target rate is now higher than at any time since before the financial crisis in 2008.

With mortgage and other market interest rates increasing with the overnight rate, fears of a recession are mounting. There are two big questions. First, are there alternatives to the blunt overnight rate for fighting inflation? Second, how bad will the recession need to be to bring inflation back down? Unfortunately, the answer to the first question is no, there aren’t any viable alternatives. However, the recession that could result…

Wednesday’s inflation report from Statistics Canada showed that the consumer price index was up 7.7 per cent year-over-year in May. That’s alarming for two reasons. The obvious one: our money’s purchasing power is falling faster than at any time since the early 1980s. The other reason will take time to sink in: We are headed for a recession.

Getting inflation back to its 2-per-cent target would inevitably have been a challenge for the Bank of Canada. The fiscal and monetary stimulus at the beginning of the COVID-19 pandemic went on too long, and now it has combined with pent-up saving by households who could not travel, eat out or enjoy in-person entertainment for two years to unleash a torrent of spending. Demand is above the…

The Bank of Canada continued its tightening cycle on Wednesday by announcing a 50-basis-point increase that brings its target for the overnight interest rate to 1.50 per cent. That met market expectations and means the total increase since February has been 1.25 percentage points. Expect more hikes to come.

By the end of last year, the Bank of Canada had recognized that inflation had overshot projections and was going to be more persistent than previously forecast. The bank passed on an opportunity to raise rates in January, but has done so three times since, including two highly unusual hikes of 50 basis points — something not seen for over 20 years.

Does this mean monetary policy has tightened since the end of last year…