Inflation may have peaked but that doesn’t mean we’re anywhere near back to normal, experts say.
Just a week after Statistics Canada reported inflation rose to 8.1 per cent year-over-year in June — the largest increase in nearly four decades — some economists say inflation has peaked, but warn of turbulence ahead for the country’s fragile economy.
Last month’s inflation numbers were “a little softer than expected,” said Shenfeld, who predicts the July and August inflation numbers will also be a few tenths of a point below the central bank’s forecast from earlier in the summer.Shenfeld says the cost of gasoline is one of the primary commodities bending the inflation numbers. Fuel prices in Toronto currently sit around $1.80 per litre after topping $2.10 earlier this spring.
“We were already getting some big monthly increases in prices at this time last year,” he said. “So if we don’t exceed that, then the year-over-year rate of inflation will start to come down.” In a report published July 22, Douglas Porter, chief economist and managing director of BMO Financial Group, wrote there are a “variety of encouraging signs that inflation may be at an inflection point.”
While Royce Mendes, managing director and head of macro strategy at Desjardins, is “cautiously optimistic” inflation has peaked, he also noted there are many factors that could disrupt the downward trend. “Even if peak inflation is in the rear-view mirror, but we settle at four per cent inflation, it’s still a problem. It’s certainly no time to say that this is mission accomplished by any means.”
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