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Canada's Inflation Rate Hits Highest Level Since 1991
Written by RBC Economics | Published on March 18, 2022
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This report was first published by RBC Economics on March 16 under the title, “Canada's inflation hit 5.7% and price pressures broaden in February"
Canada headline consumer price index (CPI) rose to 5.7 per cent in February, the highest level since 1991 (the year the Bank of Canada first announced an inflation target). Almost half of that gain can be traced to growth in food and energy prices.
Shoppers paid substantially higher for food in February — 6.7 per cent over year ago levels, with prices up both at grocery stores and restaurants. Energy prices also increased, climbing 24 per cent in February from a year ago, and that growth likely accelerated into March with the Russian invasion of Ukraine sending oil (and gasoline) prices sharply higher. The prices of some metal and agricultural products have also spiked higher, and will add to inflation pressures down the road.
There is little that the Bank of Canada can do to influence global commodity prices, but domestic price pressures also continue to broaden. Shelter costs have surged 6.6 per cent from a year ago with heated housing markets boosting resale prices, and vehicle prices are still high as suppliers have struggled to keep up with demand due to global supply chain disruptions.
Roughly 65 per cent of the CPI basket was growing above the central bank's target 2 per cent versus pre-pandemic levels in February. Geopolitical risks have intensified, but firming inflationary pressures alongside tightening labour markets make a strong case for the Bank of Canada to raise rates from emergency low levels, and we expect the Bank of Canada will hike the policy rate by another 25 basis points in April.
Find the full report, plus the RBC Inflation Watch tracker, at rbc.com/economics.
This report was authored by RBC Economist Rannella Billy-Ochieng.
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