Effects of Inflation 🇨🇦
Table of Contents :
Canadian Inflation.
Effect on Families.
Running out of Money.
Inflation easing, not Anxiety.
CEOs Summoned.
Bank of Canada's take.
Disclaimer.
Inflation is a key economic indicator that directly affects cost of living in Canada.
With growing costs it can be tough to make ends meet, which is why Canadians should be aware about rate of inflation.
To better comprehend what's driving inflation these days consider current economic developments, government policies, consumer behaviour, labour situation and so on.
Canadian Inflation.
Canada's inflation rate is 6.3% in December 2022, down from 6.8% in November while it was 4.8% a year earlier.
The next inflation numbers will be released on February 21, and based on the pattern it should be lower than in December.
It has dropped significantly from a record of 8.13% in June of last year, but still remains higher than historical long-term average of 3.14%.
Bank of Canada's mandated inflation rate target is around 2 to 3%, and historically it has been in that range except now hence the current challenges.
Effect on Families
According to recent Stats Canada report, 1 in every 4 Canadians cannot afford a $500 unexpected bill.
This survey further states that almost 35% of the population found it difficult to make both ends meet during these difficult times, as cost of everyday vital commodities have skyrocketed.
On the other hand, over 44% of Canadians are concerned about their housing which includes their capacity to pay mortgage payments or even rent.
Huge majority of population is being alarmed by rising gasoline as well as rising basic food prices.
Running out of Money
According to a recent poll, high inflation and interest rates are harming more Canadians particularly women whose budgets are reaching breaking point.
About 22% of the population is absolutely impoverished, unable to pay for additional household essentials & this figure is relatively greater among women.
Furthermore, one-third of Canadians are under pressure to meet growing expenses of basic necessities such as food clothes transportation and shelter, forcing them to adjust their spending habits and plans.
Worryingly, half of respondents stated they won't be able to sustain future price rises in their budget which should worry policymakers.
Inflation easing, not Anxiety
Even as inflation has moderated in recent months, the fact remains cost of living is up 6.3% in December and most Canadians don’t feel relieved.
Because most of us have been accustomed to low inflation and interest rates for a lengthy period of time, as a matter of fact we are used to spending and borrowing beyond our means.
Half of Canadians are still anxious about not having enough money to feed their families, and women with children are disproportionately more likely to be concerned.
This plainly shows that there is a gender disparity in finances, which is astonishing for a G7 economy that we are.
CEOs Summoned
Members of Parliament have called executives from Canada's top supermarket companies to account for soaring food costs.
According to a NDP Leader, "Those at the heads of these companies where the buck stops should at least have to answer questions around why their profits are so high, and why food prices are so high,"
The committee launched investigation in October where initially scheduling six sessions to address the topic.
What Canadians require is their government representatives to ask CEOs of these companies about food price inflation, when big box grocers are making record profits.
I understand that they are are food wholesalers that acquire commodities from suppliers and then sell to customers, but questions need to be asked about their oversized profits during these challenging times.
Bank of Canada's take
Given Canada’s high inflation a slowdown in our economy is a good thing, according to Bank of Canada’s governor.
He stated that increasing bank rates are cooling our economy because higher borrowing costs limit consumption.
The logic is that as demand for products and services goes down, our economy will continue to decline which he believes is a good thing when economy is overheated.
That is why since March of last year our central bank has raised its key benchmark rate eight times in a row, raising it from near zero to 4.5% right now.
They announced to have a conditional pause in rate hikes to analyze it’s effect on economy and inflation before taking any further monetary tightening.
Disclaimer :
As a disclaimer, I’m not a financial advisor please consult one before investing based on your personal financial situation.