MONTREAL ― A key measure of consumer prices has hit its highest level in 10 years, giving Canada one of the highest inflation rates of any developed country.
Statistics Canada’s measures of core inflation averaged 2.2 per cent in October, the highest pace since 2009.
Core inflation measures consumer prices for goods and services excluding the food and energy sectors, which are volatile and tend to move unpredictably from month to month. Economists say core inflation offers a clearer view of actual trends in consumer prices.
Watch: Tenants and homeowners in Toronto reveal how soaring prices have affected them. Story continues below.
Including those volatile items, Canada’s consumer price index fell slightly in November, down 0.1 per cent, but is still 2.2 per cent higher than a year ago. Some of that increase reflects gas prices that were particularly low in November 2018.
But certain items have soared in cost over the past year. Meat is up 5.2 per cent, with ham and bacon seeing a hefty 9.1-per-cent rise.
Mortgage interest costs are up 6.6 per cent from a year earlier, the data showed ― one of the reasons why Canadians are now paying the highest share ever of their incomes to cover debt payments.
The latest numbers mean Canada is seeing one of the highest rates of consumer price growth of any developed country. Only the Netherlands and Iceland have had higher inflation in recent months, according to data tracked by the Organization for Economic Co-operation and Development (OECD).
All of the developed world has experienced disinflation ― a long-term decline in inflation rates ― in recent decades. However, Canada has emerged with particularly high rates of inflation compared to other industrialized countries.
Many economists say this is at least in part due to the country’s rapid population growth, the fastest of any G7 country.
The increase in inflation could be bad news for Canada’s overstretched borrowers. Higher inflation makes it less likely that the Bank of Canada will cut interest rates ― something many households could benefit from as insolvencies rise across the country.
But inflation is only a notch above the Bank of Canada’s two-per-cent target, so it’s also unlikely the Bank will increase rates.
“However, if the core measures accelerate further, monetary policymakers could start to take more notice of consumer prices,” CIBC economist Royce Mendes wrote in a client note.
Others expect the Bank of Canada to cut rates next year all the same.
RBC economist Josh Nye predicted next week’s GDP numbers from StatCan will show a weakening economy, and that “should leave the door open to a rate cut next year, even with underlying inflation now on the high side of two per cent,” he wrote in a client note.