Statistics Canada reported today that the annual inflation rate remained 2.9% and the Bank of Canada’s core rate remained 2.1% in November.
The monthly increase in consumer prices slowed to 0.1% in November from 0.3% in October. The monthly increase in core prices slowed to 0.1% in November from 0.2% in October.
Inflation remains modest and should not deter the Bank of Canada from keeping interest rates low, and perhaps reducing them, to support our fragile economy and labour market.
However, even this modest inflation exceeds the small pay increases received by Canadian workers. While the Consumer Price Index rose 2.9% last month, the Labour Force Survey indicates that average hourly wages rose only 2.4%. In Ontario, inflation exceeds wage growth by a full percentage point: 2.5% versus 1.4%.
The Minister of Finance announced yesterday that, while the Canada Health Transfer and Equalization will be tied to nominal economic growth (projected to be about 4% annually), the Canada Social Transfer for post-secondary education and other provincial services will grow at only 3% annually. Today’s inflation figures beg the question of whether that will even cover inflation plus population growth.
Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.
UPDATE (December 20): Interviewed on the Business News Network