By William Crooks
Local Journalism Initiative
The big picture on inflation may not be as bad as it seems, according to Sherbrooke University professor of economics Jean-François Rouillard. The CIBC has released a poll on Canadians’ attitudes towards inflation and The Record hit the pavement to see what Townshippers had to say themselves.
“Inflation is the growth of prices, usually measured on an annual basis,” Rouillard began, which, in Canada from May 2022 to May 2023, was 3.4 per cent. If prices increase, the purchasing power of consumers is lessened, if their income stays the same.
Any increase in prices for any reason counts as inflation, Rouillard reiterated. The measurement that economists use to track inflation which is most relevant to the day-to-day lives of consumers is the Consumer Price Index.
There are many causes and factors that contribute to inflation, he continued. The main cause over the past two years was the rise in oil prices, “related to the war in Ukraine.” Rouillard emphasized that oil prices have this effect because of their ubiquitous use in transportation and manufacturing. Economists have also pointed to the increase of government spending during the Covid pandemic, he said, which created excess demands on goods and raised their prices overall.
According to Rouillard, the notion in circulation that inflation is a hidden tax, because government spending has a direct effect on inflation and reduces spending power, is a misconception. Wages have been rising at a rate of around 5 per cent, so spending power has not decreased overall, he countered. “It’s not the usual definition of a tax,” he added.
Rouillard stated inflation has been decreasing for the past five months. The peak of inflation, he said, was last year in June at 8 per cent. This is because of the decrease in oil prices, he continued, and the effects of the monetary policy of the Bank of Canada, which raised interest rates. According to Rouillard, the Bank of Canada’s target is to ultimately reduce inflation to 2 per cent, but that will be difficult to achieve next year. He predicts inflation rates will stay at around 3 or 4 per cent for the time being.
