the rennie brief - Changing Consumer Prices In Canada

the rennie brief - Changing Consumer Prices In Canada

INFLATION

WHAT YOU NEED TO KNOW ABOUT CHANGING CONSUMER PRICES IN CANADA • Canada’s Consumer Price Index rose by 4.4% in September 2021—the largest rate of inflation seen in Canada since 2003, and a second consecutive month with an inflation rate of greater than 4%. • The rate of inflation varied across Canada, with British Columbia experiencing a below-average 3.5% increase in prices. • Overall, the price level is now 4.0% higher than it was immediately before the pandemic; alternative scenarios indicate that the price level would only be up to 1.8% higher had there been no pandemic.

the rennie brief

21 OCTOBER 2021

At 4.4%, Canada’s annual inflation rate in September was at its highest level in almost 20 years, reflecting supply constraints, base-year effects, and increased consumer spending.

Actual & Estimated Inflation Trends CANADA

WHAT IS INFLATION AND WHY DOES IT MATTER? The economy’s official rate of inflation is calculated as the annual change in the Consumer Price Index (CPI), which has been constructed based on a fixed basket of goods and services that Canadians purchase. When inflation is high (in excess of 2-3%) and rising, the Bank of Canada (BoC) will typically increase its short-term policy interest rate; when it is “too” low (below 2%), the BoC will reduce its policy rate. These actions, and others, have implications for all interest rates, including but not limited to mortgage rates. CANADIAN PRICES SURGED IN SEPTEMBER The latest >Page 1

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