Gasoline has an outsized influence on the public’s views of inflation and the general health of the economy
The average Canadian household spends a paltry amount on gasoline, amounting to less than 5 per cent of total purchases in a typical year.
More pressure is coming. The U.S. and Britain said Tuesday they are banning imports of Russian oil, which sent crude prices skyward yet again. The increases are adding fuel to inflation, which is already at multidecade highs in advanced economies, creating a tough task for central bankers looking to rein in lofty price growth.
The Bank of Canada, which raised its benchmark interest rate last week for the first time since 2018, has maintained that long-term inflation expectations remain well-anchored. However, in a speech on Thursday, Governor Tiff Macklem said price pressures are broadening, a “big concern” that could influence long-run views of inflation.
The recent surge in commodity prices will “reduce consumer confidence even further,” Mr. Shahid noted. People also tend to view rises in gas prices as permanent. For decades, the University of Michigan has asked consumers about their expectations of future gas prices and, generally speaking, a strong majority of respondents expect those prices to stay the same or increase.