For the first time in three decades, Canada’s inflation rate has surpassed 5%. According to a Statistics Canada report recently released, the consumer price index hit the 5.1% mark in January due to supply chain problems that pushed up prices for transportation, shelter, food, alcohol, tobacco, and cannabis.
Statistics Canada has indicated that if the more volatile items like energy and food were excluded, the cost of living would only have gone up by 4.3%. Lower than even December 2021 year-on-year figures of 4.8%. Food prices were found to have risen quickly, up by 6.5% in the year leading up to January. Shelter costs have also risen noticeably by 6.2% over the past year. This is the fastest increase recorded since 1990.
Gasoline prices have also risen sharply, by as much as 31.7% since the same period last year. However, this increase affects not just household expenses, but also businesses who are passing on the extra cost to customers by raising commodity prices. Economists are warning that price gains will continue through the coming months and may only be expected to slow down as from 2023. Some point to recent border protests and blockades as likely to add to inflationary pressure.
Economists like Royce Mendes of Desjardins note that as energy prices continue to rise, inflation can be expected to keep increasing with little chance of slowing down before April. This is shortly after the Bank of Canada is expected to raise benchmark interest rates to help curtail spiralling inflation which is now far beyond the central bank’s 1-3% control range.
Bank of Canada announced in January that interest rates would start increasing as a means to discourage spending and bring down inflation. Currently at 0.25% since the start of the pandemic measures in March 2020, financial experts believe the government should start making increases as early as March 2. Inflation rising to over 5% was anticipated by the government, which it expects to drop down to about 3% by the end of the year.
Some 400,000 minimum wage workers in British Columbia are expected to benefit from an announcement by the provincial government to tie minimum wage increases to rates of inflation. The Fair Wages Commission is looking at what approaches can be used to implement this ahead of wage increases on June 1. The Ministry of Labour confirmed that more information would be shared in the coming months to give businesses adequate time to prepare.
Contact Accountancy Insurance
We would love to hear from you.
About Accountancy Insurance:
Thousands of accounting firms offer our tax audit insurance solution, Audit Shield to their clients. Find out why.