ONTARIO — Fingers are crossed about a “soft landing” for the economy as the Bank of Canada attempts to tame inflation with recent interest rate hikes. “But as the brakes start to screech” on the economy, the Conference Board of Canada says “Canadians are bracing for impact.”
In its July 20 “quick take” on the economy, the conference board suggested inflation has not yet peaked after 15 months of underestimations by the Bank of Canada.
The Consumer Price Index (CPI), a measurement of consumer goods, rose by 8.1 per cent in June, on a year-over-year basis. Food prices were up 9.4 per cent in stores and 7.1 per cent in restaurants, compared to June 2021. However, the biggest price spike was felt at the gas pump. Gas prices have jumped 54.6 per cent in one year.
“With price pressures still boiling over, we expect that year-over-year changes to the CPI will not start to fall until later this year,” the conference board predicts in a release acknowledging the Bank of Canada’s recent “shock” interest rate hike. The Bank boosted its benchmark overnight rate a full percentage point, to 2.5 per cent, on July 13, the highest increase since 1998.
Month-over-month, all items on the CPI continued to rise in June. On a seasonally adjusted monthly basis, the rise of the CPI did ease a bit. The index rose 0.6 per cent in June over May, a decline from the 1.1 per cent posted in May over April.
However, as they pay more at the checkout aisle and gas pump, the negative inflation picture continues to weigh on Canadians.
The conference board in June reported that consumer confidence had fallen to its lowest level in 18 months. That key measure fell even further in July.