Fresh Takes

Inflation No Longer Falling

Inflation in Canada is no longer trending downward. Statistics Canada announced yesterday that the 12‑month inflation rate had climbed to 4.4% in April 2023, up from 4.3% the month before.

This is a sign that inflation has still not been tamed, a factor the Bank of Canada will have to take into account if it wants to resolve the crisis. Indeed, the United States recently raised its policy interest rate in response to the stagnation of its own fight against inflation.

Unfortunately, the renewed increase in the inflation rate should come as no surprise. When we look carefully at the forward-looking inflation rate, a measure of current price variation on an annualized basis, we see that it was already rising after reaching a low in February.

What is the forward-looking inflation rate? It’s the variation in prices for the past month or quarter, annualized to determine how much they would rise over 12 months if the current trend were to be maintained.

The principle is similar to the speed of a car and to what the dashboard speedometer shows us: how far we will have travelled in one hour if we maintain our current speed (km/hr).

It’s unfortunate that Statistics Canada stopped publishing these data in 2007. After all, we don’t get dressed in the morning based on the temperature the day before, but on the current weather and the forecast for the immediate future.

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