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VANCOUVER INFLATION ACCELERATING
Central banks don’t just raise and drop interest rates for the fun of it. For example, the Bank of Canada’s mandate is to promote the economic and financial welfare of the country and, as part of that, to maintain a low and stable rate of price inflation. The primary tool used to do this is the overnight target interest rate: higher rates encourage saving over spending, which tends to reduce inflation, while lower rates encourage spending over saving, with the opposite effect on inflation. The target inflation range for the Bank is 1%-3%, as measured on a year- over-year basis. Nationally, the inflation rate is currently 1.4%, though in the country’s large metro
regions it is higher, reflecting relatively robust economic activity. Metro Vancouver leads the way, with a 3.1% inflation rate in the four quarters ending in Q4 2018, ahead of Toronto (2.6%) as well as Calgary and Edmonton (2.0% and 2.1%, respectively). Despite lower home prices, a tight labour market and an active consumption economy in Vancouver have seen the most recent rate of inflation (3.1%) double that which averaged the past five years (1.6%). The future direction of local inflation is uncertain, with slowing inflation at the national level competing with factors in this region that point towards continued increases in the prices of things.
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