As inflation continues to skyrocket, experts say Canadians need to survive for some time before prices fall.
"We may not see peaks in the coming months," Sarguatieri, director and senior economist at BMO Capital Markets, told CTV News.ca. "I don't think there will be much easing in terms of inflation, at least in the short term."
In a report released this week, Statistics Canada said Canada's year-on-year inflation rate was May. Said to reach7.7%, the highest since 1983.
One of the main reasons behind the continued rise in inflation is the ongoing conflict in Ukraine and its impact on gas prices.
"We need to see energy prices, especially oil, continue to fall before we can get meaningful bailouts," Guatieri said. “Energy costs are not only detrimental to pumps, but are also essentially a major driver of supply chain input costs for all commodities and transportation and distribution networks.”
Of the University of Toronto Metropolitan Amy Penn, associate professor of economics, said another factor driving inflation was the long-standing relationship between Canada and the United States. She said that as long as inflation continues to rise in the United States, it will rise here as well, depending on how integrated the economies of the two countries are.
"Note that their Federal Reserve Bank makes the decision first and we follow," she said. “Therefore, there is always this lag effect.”
Inflation is currently around 8.6% in the United States. The United States raised interest rates by 0.75% on June 15 to the range of 1.5% to 1.75%. This is the largest increase since 1994. The Bank of Canada finally raised the national interest rate to 1.5% on June 1st.
"The way to curb inflation is to keep raising policy rates, so we're continuing to raise them this year," Penn said, saying the Bank of Canada will announce the highest interest rates. He added that he was expecting it. With rate hikes since 2008, Canada will reach 2.25% in a few days.
According to Penn, this increase is projected to reach inflation of about 8.5% in Canada in the coming months, which will be comparable to inflation in the United States.
Canadians may be swayed by the idea that the economy will worsen during the summer, but Guatieri said it is likely the only way out of this recession. ..
"Unfortunately, we will need to see some destruction," he said. "That means next year's economy will be much weaker, but it's a kind of medicine to cure high inflation."
How can Canada modify its inflation course?
Mr. Penn said that Canada's inflation peak has not yet occurred, but continued inflation could affect consumer spending enough to reduce Canadian purchases. As a result, inflation began to decline, he said.
"How much does it affect people's spending habits and spending patterns?" She said. "If this is enough to affect the demand side of the economy you ultimately want to see, inflation can eventually fall with it."
But the economy According to Armin Jarnizan, a scholar and Atkinson Fellow on the future of workers, consumer demand does not seem to slow as prices for non-essentials are also rising.
"What really surprised [the Bank of Canada's inflation announcement] was how much we went back to discretionary spending and pushed up overall price levels," she told CTV News.ca. rice field. In connection with increased spending on flights, hotels and other recreational activities due to the removal of pandemic-related regulations in Canada.
"Basically, people want to party, people want to travel, and it just doesn't have enough supply and it's raising prices."
But Yalnizyan Said Bank of Canada's attempts to reduce demand through high interest rates are already working in one industry, the housing market.
"The only part of the inflation they include is the demand for homes by raising the prices of homes, so we are pricing more buyers," she said.
The Canadian housing market cooled in May, and the Canadian Real Estate Association said in a reportreleased on June 15. According to experts, 9% from April to May was the result of the Bank of Canada's interest rate hike negatively impacting those who have a mortgage or want to get one. That is.
"And when doing so, when demand is low, we usually see some decline in pressure to keep prices rising," Yalnizyan said.
Another way to curb demand is to increase supply, Guatieri said. However, production companies around the world face major geopolitical hurdles.
"Due to continued supply turmoil,the war in Ukraineis causing producers to increase production of cars, furniture and all other items. Not. The blockade of theregion in China", adding that labor shortages are also affecting supply.
Yalnizyan said that the end of the war in Ukraine, the end of the pandemic, and the real move in tackling climate change are all important in controlling inflation and improving supply.
"To see this, I had to go back to the beginning of the 20th century and the clash between the Spanish flu and World War I for 100 years," she said. "In addition, there was no such thing as extreme weather, so I got all these things that are delaying supply."
Without an improvement in inflation, the result Can be "catastrophic" for Canadians, Penn said.
"I haven't seen this since 1983 with this level of inflation. I don't know if you remember, but the interest rate is about 10% and the mortgage rate is 20%. It was over. It's crazy, "she said. "We can't live that way ... it will disrupt our economy."
But, as Yalnizyan points out, recessions vary. It tends to affect socio-economic groups in many ways. She said consumer demand is rising for people who still have disposable income that may be part of the problem.
"I think a very difficult moon will come," she said. "Not for those who have extra money, but for those who were struggling before this all started. We are actually challenging the quality of life of people, changing into consumption inequality. I'm looking at income inequality. "
Using files from the Canadian Press