Did someone say inflation was a transitory problem?
The March data belies this notion -- with CPI inflation year on year at a whopping 6.7 percent.
Some of us have been warning about inflation. I warned about it last fall, earlier this spring speaking to a Parliamentary committee, and then again shortly after that.
The latest numbers are out — see here — and they’re not pretty. From 5.7 percent in February, inflation in March, computed on a year-on-year basis, is now a whopping 6.7 percent — the highest inflation Canada has seen since the early 1990s. The chart below is reproduced from Statistics Canada.
We all know what it took to combat that earlier episode of inflation — a terrific monetary tightening that pushed the economy into a sharp but necessary recession between 1990 - 1992, and managed to re-anchor expectations and set us up for the inflation targeting era.
The Bank of Canada has made a promising, if belated start, with its recent 50 basis points increase in the policy rate. They are going to have to act aggressively, and soon. Another 50 basis points at their next policy-setting meeting seems warranted, based on the current numbers. But will they have the nous to pull it off? We’ll see….