Inflation: Canada compares favorably to other countries

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Inflation&nbsp ;: Canada compares favorably to other countries

Inflation remained stable in October, rising to 6.9% for the second consecutive month.

Many Canadians are being hit hard by the most high inflation for several decades, but, small consolation, a sounding around the world shows that the country compares favorably to several other powers.

In Canada, the annualized inflation rate fell from 8.1% in June to 6.9% in October.

Although this rate remains above the Canadian target of 2%, it is well below that observed in the United States, the United Kingdom and the European Union.

Douglas Porter, senior economist at the Bank of Montreal, says the comparison game is tricky because not all countries calculate the rate of inflation the same way. However, he is of the opinion that Canada is doing better for the moment.

Even taking into account the different calculation methods, it must be remembered that the x27;Inflation in Canada is lower than those of the world's major economies, he said.

Mr. Porter finds that the leaders in this area are Switzerland, Japan and China, where inflation is stagnating between 2% and 3%.

In the United States, the pace of inflation seems to have eased in October. It stood at 7.7%, which pleasantly surprised the experts.

The economist attributes the strongest inflationary pressure in the United States to two causes : a faster post-pandemic recovery and a more dynamic fiscal policy for recovery.

Joe Biden pushed through a $1.9 trillion emergency plan in March 2021, just after arriving at the White House.

Mr. Porter points out that inflation is particularly high in Europe because of its dependence on Russian energy resources.

UK inflation rose to 11.1% in October, its worst reading in 41 years. In the European Union, the situation is hardly rosier since inflation is at 10.6%.

Europe has imposed sanctions on Russia following the invasion of Ukraine. In retaliation, Moscow cut off its natural gas supply, raising fears for the onset of winter temperatures.

This is the main reason why the rate inflation in Europe is so much higher than in North America, says Douglas Porter.

Central banks have responded by raising interest rates, a policy aimed at slowing economic growth.

Some have criticized the Bank of Canada, accusing it of for waiting too long to jump on the bandwagon. Porter, however, believes it has been quicker and more aggressive than other central banks.

The Bank of Canada did this earlier than other central banks. That's why our inflation is a little lower here, he says.

The Canadian central bank has raised its key rate six times in a row since March. It increased from 0.25% to 3.75% during this period. Its governor, Tiff Macklem, has already warned Canadians that more hikes could be announced.

The US Federal Reserve also began raising its key rate in March. This stands at 4%.

The Bank of England and the European Central Bank have a key rate of 3% and 1.5% respectively

Mr. Porter argues that even more robust measures from the Central Bank of Canada and the US Federal Reserve could slow inflation further.

He warns that the path will not be easy.

We must be prepared for a long struggle to achieve control of the disease. inflation, he says.

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