‘Tough’ 6-12 months ahead for Canadians amid inflation, rate hikes

The front-load increases now is short-term pain that is necessary to bring inflation down for the long term

Toronto

As Canadians face a double whammy of skyrocketing inflation and the largest interest rate hike seen in 24 years, one expert is warning that prices won’t be coming down anytime soon.

Carleton University economics professor Vivek Dehejia says there may be “some relief” in sight, but not a whole lot, and expects a “tough six months to a year for average Canadians.”

He says the pressure points that played a big role in pushing inflation to a near 40-year high “are still in play,” namely ongoing supply chain disruptions, labour shortages and the war in Ukraine, which is driving fuel and food prices up, with no end in sight.

Dehejia doesn’t think the future of Canada is one where it will be too expensive to simply live, though, as prices will eventually stabilize and wages and salaries will rise.

The Bank of Canada increased its key interest rate by one percentage point Wednesday as inflation in the country runs well over seven per cent.

In his opening statement Wednesday, Bank of Canada governor Tiff Macklem acknowledged that “higher interest rates will add to the difficulties that Canadians are already facing with high inflation,” but said the decision to front-load increases now is short-term pain that is necessary to bring inflation down for the long term.

This report by The Canadian Press was first published July 14, 2022.

Feature image – Produce vegetables are displayed for sale at a grocery store in Aylmer, Que., on May 26, 2022. THE CANADIAN PRESS/Sean Kilpatrick.

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