Canada's inflation rate decelerated to 3.4 per cent in the year up to May, Statistics Canada said Tuesday, led by sharply lower gasoline prices. But beneath the headline slowdown in consumer prices, many facets of the cost of living are still increasing at an eye-watering pace. Grocery prices went up at an almost nine per cent pace.
Maybe it's time for the Canadian government to now focus on what's actually causing inflation, instead of jacking up interest rates quarter over quarter. Maybe go after the grocery and gasoline retailers for their quite clearly collusive behaviour. Because putting my mortgage up another $1,000 a month isn't going to fix that.
In some ways it will because now your disposable income will be reduced thereby crimping your ability to spend on consumer goods. You have to remember that the last time housing pricing went through the roof decades ago, BOC jacked up interest rates in order to bring prices back to earth and yes home owners who bought at the wrong time did suffer. These historically low interest rates are as much to blame for the housing price increases as the lack of new builds supply due to restrictive regulations and zoning policies. If we are to solve the affordability problem, housing prices will have to decline. Housing as the main wealth creation tool for the upper middle class of Canada and as a big driver of the economic growth has undesirable consequences that we are facing now.