Reference to the CFA’s Advocacy Update from July 22, 2022

Canada’s inflation rate rose to 8.1 per cent last month, Statistics Canada says, the fastest annual increase in the cost of living in decades.

Gasoline was the biggest single contributor to the overall rate going up, as pump prices were up by 54.6 per cent compared to the same month a year ago. If gasoline is stripped out, the inflation rate would be 6.5 per cent.

Another major source of inflation this year has been food prices, which rose by 8.8 per cent in the past year. That’s the same pace of increase seen the previous month.

On top of higher prices for food and gasoline, the data agency documented a surge in demand and prices for travel-related services. “The return of sporting events, festivals and other large in-person gatherings has resulted in higher demand for accommodation, particularly in major urban centres,” Statistics Canada said.

Prices for accommodation rose by about 50 per cent across the country compared with a year ago, and the cost of air transportation rose by 6.4 per cent in the month and is up by 25 per cent compared to a year ago.

More rate hikes expected

Although the 8.1 per cent figure is the fastest annual increase since 1983, economists had been expecting the rate to come in even higher, with a consensus of those polled by Bloomberg forecasting a rate of 8.4 per cent.

Despite yet another multi-decade high in inflation, Wednesday’s data will likely come as a small relief to the Bank of Canada, which has been undertaking an aggressive campaign of raising interest rates to rein in the runaway cost of living.

After raising its benchmark rate by the biggest amount in 20 years last week, the bank is forecast to keep raising lending rates, although perhaps not as aggressively as before. 

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