Bank of Canada official Nicolas Vincent, in his recent address as external non-executive deputy governor, highlighted the challenges faced in achieving the central bank's two percent inflation target. Vincent, who also serves as an economics professor at HEC Montréal, underscored key factors contributing to ongoing inflation pressures.
The COVID-19 pandemic disrupted the traditional economic landscape, leading to increased savings and a resilient labor market, resulting in a state of excess demand, which drives up prices and wages. Beyond the bank's control, global factors like energy prices influence inflation. For example, gasoline prices increased by 0.8 percent year-over-year in August, impacting overall inflation. Rising fuel costs can affect prices across various sectors, as businesses pass on transportation expenses to consumers.
During the pandemic, companies deviated from usual pricing behavior, raising prices more frequently due to higher costs and strong demand. This trend, both nationally and internationally, is closely tied to unexpected inflation. Firms assessed their competitors' ability to secure adequate supply and, if in doubt, raised prices to protect profits, ultimately raising costs for consumers.
A significant concern expressed by Vincent is the risk that these price hikes, combined with consumer worries about future increases, could create a self-perpetuating cycle, further inflating prices. Consumers, anticipating higher costs ahead, may accelerate their purchases to avoid future expenses, potentially intensifying inflation. This feedback loop could make prices even more sensitive to economic shocks. In essence, if recent pricing behavior persists, it could complicate the Bank of Canada's efforts to restore low, stable, and predictable inflation.
Yorumlar