Inflation Monitor – June 2022

Published: June 7, 2022
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Abstract

This report provides current analysis of recent consumer price inflation data.

Highlights

  • Total CPI inflation has exceeded the 3 per cent upper bound of the Bank of Canada’s control range since April 2021. With a rate of 6.8 per cent recorded in April 2022, CPI inflation now sits at its highest level since the introduction of inflation targeting in 1991.

  • The ultimate impetus for the resurgence of high inflation can traced back to the COVID-19 pandemic. More recently, the Russian invasion of Ukraine has compounded inflationary pressures.

  • Relative to pre-pandemic (February 2020) levels, the increase in the CPI in April 2022 (of 9.0 per cent) is only slightly higher than the increase in average wages (8.6 per cent) over the same period and has outpaced the increase in the maximum OAS payment (of 5.7 per cent), due to the time lag in the indexation of monthly payments.

  • As inflation started to recover and rise above average levels in 2021, the dispersion of price changes spiked and has remained elevated near historical highs, suggesting that inflationary pressures have been concentrated across consumer expenditure items.

  • Our finding of “concentrated” inflation is consistent with the view that supply or sector-specific issues are a key driver of high inflation. A finding of broader-based inflationary pressures would be more consistent with stronger aggregate demand as the primary driver of high inflation.

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