The cost of just about everything that Statistics Canada measures was more expensive in September, pushing headline inflation to its highest in almost two decades and complicating the Bank of Canada’s plans to keep interest rates pinned near zero until well into 2022.
Statistics Canada’s consumer price index (CPI) increased 4.4 per cent from September 2020, the biggest year-over-year increase since the CPI surged to 4.7 per cent in February 2003. The index rose 0.2 per cent from August, matching the previous monthly increase, as prices rose in every major component that the agency watches, led by outsized gains in the cost of transportation and shelter. Food prices also exerted considerable upward pressure on the headline number.
Prices are being driven higher around the world by an extreme mismatch between supply and demand. Factories everywhere were idled in the early months of 2020 to slow the spread of COVID-19, and also in anticipation of a long recession. But unlike previous recessions, demand never really went away because governments offset health lockdowns with unprecedented rescue packages. Suppliers are now scrambling to catch up, clogging ports and other transportation lanes that are dealing with their own pandemic-related issues...
This was excerpted from the 20 October 2021 edition of the Financial Post.