rates
A TEMPORARY VACATION FROM INFLATION Fears about rising inflation in a low-inflation environment are akin to paying interest on debt before it’s due.
Much speculation has been swirling about the impact on consumer prices that the expansion of the country’s money supply and the reduction in interest rates will have. That there is debate is no surprise; as noted in the previous pages, interest rates—both short- and long-term—have been at record lows, and as noted in the following pages, federal government deficit spending has been downright unprecedented. Notably, runaway inflation did not characterize any part of the period between the Great Recession of 2008/9 and the Great Suppression of 2020, despite what
was at the time, in 2009, monetary stimulus without peer. After experiencing deflation in April and May of 2020, prices have since been rising, though at a muted pace (most recently at 1.0% annually). Where there have been increases (recreation, shelter, health care, and food, to name a few), these have been offset by gasoline and clothing prices that have remained depressed. While this is certain to change in the coming months, the jury remains out on the extent to which inflation—and by extension interest rates—makes a comeback.
AN OBJECTIVE PERSPECTIVE ON THE CONSUMER PRICE COLLECTIVE
RECREATION & EDUCATION
2.9%
HOUSEHOLD OPERATIONS
1.4%
SHELTER
1.4%
HEALTH PERSONAL CARE
1.3%
TRANSPORTATION
1.0%
FOOD
1.0%
ALCOHOL TOBACCO CANNABIS
0.6%
GASOLINE
-3.3%
CLOTHING
-4.1%
2%
3%
4%
-5%
-4%
-3%
-2%
-1%
0%
1%
SOURCE: STATISTICS CANADA DATA: JAN 2020 - JAN 2021 CHANGE IN THE CONSUMER PRICE INDEX BY CATEGORY, CANADA
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