Don’t Worry Too Much About Inflation

Price pressure still looks transitory and set to shift from goods to services.

Yan Barcelo 27 July, 2021 | 4:28AM
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In a June statement, the Bank of Canada said, “Core measures of inflation have also risen, due primarily to temporary factors and base year effects, but by much less than CPI inflation. While CPI inflation will likely remain near 3% through the summer, it is expected to ease later in the year, as base-year effects diminish and excess capacity continues to exert downward pressure.”

The position of central bankers is quite straightforward, explains Royce Mendes, director and senior economist at CIBC Capital Markets. “A year ago, prices for things like gasoline were very low, after plunging in response to the emerging coronavirus pandemic. Comparing prices today to prices then produces a temporarily high twelve-month inflation rate. But as time marches forward, and standard twelve-month comparisons are no longer being made to that period of depressed prices, these base effects will fade.”

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About Author

Yan Barcelo  is a veteran financial and economic journalist with more than 30 years of experience, writing for many publications in Toronto and in Montreal, including CPA MagazineLes Affaires and Commerce.

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