It may sound like a circular argument, but the only way to stop inflation is to stop companies from raising prices. And the only way to stop that is to get inflation under control. And that could mean an end to the interest rate hike pause.
After Tuesday’s latest release of inflation data, warnings from Bank of Canada governor Tiff Macklem in his testimony to parliament last week offer a stark reminder of how difficult, but how essential, it is to convince the sellers of goods and services to stop raising prices.
While overall inflation has eased to 5.9 per cent, that’s still high. Groceries are up another 11.4 per cent.
That’s difficult for consumers, whether businesses buying from other businesses or ordinary Canadian shoppers. Macklem said they simply cannot distinguish reasonable and necessary price rises to cover rising costs from price hikes merely to pad the bottom line.
He warns sellers: if price hikes continue at the pace we’ve seen recently, he may be forced to take action.
Hidden in plain sight
The latest slowdown in rising prices, finally falling below six per cent for the first time since February a year ago, is being read by many as a favourable sign.
Though it’s useful to view that number in context: that’s 5.9 per cent higher than a year ago when prices were already rising quickly, or what economists call the “base-year effect.”
A fall in global oil prices, which last week Macklem described as the “biggest contributor” to falling inflation, obscure the rising cost of other consumer necessities, like food.
As people as diverse as Federal Reserve chair Jerome Powell and Canadian labour economist Jim Stanford have noted, despite continued talk of a wage-price spiral, wages have not led the post-COVID bout of inflation. Wage hikes have steadily been below inflation. Latest Canadian jobs figures show wage hikes are declining, currently running at 4.5 per cent, more than a full percentage point below rising prices.
“It looks more like profit-price inflation to me where companies very opportunistically have taken advantage of a disruptive moment to soak consumers for more than they need to,” was Stanford’s analysis in an interview with the CBC last year.
And in last Thursday’s testimony to the Parliamentary Finance Committee, Macklem seemed to agree.
The failure of businesses to ‘normalize’ pricing, testified Bank of Canada governor Tiff Macklem, is one of the things that could force the central bank to end its pause and keep raising interest rates. (Blair Gable/Reuters)
Macklem explained that a period of generally rising prices is a special opportunity for sellers. In the confusion of widespread price increases, consumers simply cannot distinguish between reasonable price increases due to a discreet cause — a frost in Florida that raises orange prices, for example — and price hikes meant to squeeze the customer and increase profits.
“When an economy is overheated, when inflation is high, when people see prices of everything going up, it makes it easier for companies to raise their prices because people can’t tell, is this … a generalized increase or is this just this company raising their prices?” testified Macklem last week.
In economics, the general principle is that sellers want to raise their prices as much as possible to maximize their profits. One of the reasons businesses have trouble doing that in normal, non-inflationary times is that consumers keep an eagle eye on price hikes and shun sellers they think are being greedy. But during periods of high inflation, unjustified individual price hikes are harder to distinguish and therefore retailers are harder to punish.
WATCH | What’s causing inflation to slow:
Chicken prices soar as inflation cools
15 hours ago
Duration 1:46
Inflation in Canada is down to 5.9 per cent, but food prices are still high with chicken becoming a big-ticket item on the grocery bill.
“When the economy is better balanced between supply and demand, the competitive function works much better and it’s a lot more difficult for companies to raise prices because they’ll lose market share,” said Macklem.
“They’ll lose their customers.”
Bigger, more frequent price hikes
This round of inflation had real causes: when supply chains suddenly gummed up and oil prices soared, many sellers were forced to raise their prices. Higher fuel costs and a shortage of cargo vessels meant goods cost more to ship. High worldwide demand for goods in short supply pushed input prices higher.
Essentially everyone who could was just doing their best to pass on their higher costs causing an unfamiliar flurry of pricing activity that had not been seen in decades, Bank of Canada research showed.
“The distribution of price-setting behaviour of companies changed,” Macklem told the parliamentary committee members. “Pricing increases were bigger, they were more frequent.”
But as supply chains opened up those price hikes should have begun to cool down.
The debate over whether grocery retailers in particular have raised prices too much continues to rage and may be revisited later this week when food retailer Loblaws unveils its corporate results on Thursday. The company, like other grocery chains, insists its price rises reflect increased costs.
Critics have pointed to soaring profits.
The correlation between Loblaw’s share price and the take-off of inflation in Canada is uncanny. While grocery CEOs complain they are just victims of inflation like the rest of us, merely “passing on” higher costs, their investors know otherwise. /2 <a href=”https://t.co/U1GParvi0u”>pic.twitter.com/U1GParvi0u</a>
It may be that shareholders will rejoice if they see profits continue to rise at the expense of consumer prices but if the pace and size of price hikes don’t go back the way they used to be, to “normalize” in Bank of Canada language, Macklem says he has a surprise up his sleeve.
There are many sceptics who say inflation has no intention of going peacefully and that it will be “sticky.” The last time rising prices got seriously out of hand, “The Great Inflation,” only ended in the 1980s after a brutal interest-rate shock that saw mortgage rates approach 20 per cent. That ended inflation with a bang and a devastating recession.
So far central bankers seem confident that won’t happen this time. But if businesses don’t get pricing under control soon, Macklem said he will have to do something about it.
“That process of normalization is one of the key things we’re watching to evaluate whether we raised interest rates enough to get inflation back down to target,” testified Macklem.
“And if we don’t see it continue to normalize, we will need to do more.”
KITCHENER, Ont. – The man who stabbed three people in a University of Waterloo gender studies class last year says he is remorseful and wants to apologize to anyone who was affected by his violent act.
Geovanny Villalba-Aleman addressed the court at the conclusion of his sentencing hearing today, saying his intention was not to promote violence and that he doesn’t know “what’s going on” in his head.
The 25-year-old has pleaded guilty to two counts of aggravated assault, one count of assault with a weapon and one count of assault causing bodily harm in the June 2023 attack that left a professor and two students with stab wounds.
Federal prosecutors have argued the offences amount to terrorism in this case because they were motivated by ideology and meant to intimidate the public, while provincial prosecutors argued that the crimes were hate-motivated.
The provincial Crown cited Villalba-Aleman’s hateful remarks about feminists and members of the LGBTQ+ community in a manifesto written before the attack among the aggravating factors the court must consider in the sentencing.
But the defence is arguing that Villalba-Aleman’s motivation was his belief that “left-wing thinking” stifled his freedom of speech, and that the court should consider his statements to police a more accurate reflection of his thoughts than what he wrote.
Defence lawyers have rejected the notion that the attack was driven by ideology and also said the federal Crown has not proven beyond a reasonable doubt that terrorist activity took place in this case.
As the weeklong sentencing hearing drew to a close Friday afternoon, Ontario Court Justice Frances Brennan asked Villalba-Aleman if there was anything he wanted to say to the court.
He replied that he wanted to apologize “to anybody who might be affected by this” and said he believes that violence is “not good” for any reason.
“Even though I committed a violent attack, I still … don’t know what happened,” he said. “Right now, I don’t know what’s going with my head. I still feel remorseful for what happened.”
Villalba-Aleman said that some people may not believe his apology since “the act is done,” but he asked the judge to consider his remorse.
“If there is a way to reconsider the situation because I admit that violence is not good … my intention was not to promote more violence here,” he said.
Villalba-Aleman, an international student who came to Canada from Ecuador in 2018, initially faced 11 charges in the case.
Court has heard that he will eventually be subject to a deportation order.
This report by The Canadian Press was first published Oct. 25, 2024.
OTTAWA – The federal government is giving Canada Post the ability to store and transport prohibited firearms in new regulations that bring the retail gun buyback program one step closer to beginning.
An order-in-council dated Oct. 16 allows for prohibited assault-style firearms to be removed from safes at firearms retailers, transported and ultimately destroyed.
More than 1,500 models of firearms were banned in May 2020 after a mass shooting in Nova Scotia left 23 people dead, including the gunman.
Since then, retailers that have the weapons have been required to securely keep them in their inventory.
“Once the program launches, the updated shipping regulations will make the affected firearms and devices mailable matter and will temporarily permit businesses taking part in the program to ship firearms or devices via post,” said Gabriel Brunet, spokesperson for Public Safety Minister Dominic LeBlanc, in a statement on Friday.
LeBlanc previously said that the long-promised gun buyback would begin this fall.
First, the government will buy banned firearms from retail stores and have them destroyed. An individual buyback program for people who own prohibited weapons begins next year.
In a statement, Canada Post said it is prepared to take part in the first phase of the buyback program, because retailers are already familiar with the strict rules required to safely mail firearms.
The Crown corporation maintains it will not take part in the second phase of the program, involving individual firearm owners, because of concerns with employee safety.
Gun control advocacy group PolySeSouvient, which represents survivors and families of the 1989 École Polytechnique massacre, said it’s good news to see progress made on the buyback but it has doubts about the program’s overall effectiveness.
“Unless the list of prohibited assault weapons is completed, current owners of weapons prohibited in 2020 can simply take the money from the buyback to purchase new ones,” massacre survivor Nathalie Provost said in a statement.
The group is calling on LeBlanc to expand the ban to more than 450 firearms it says should have been included in the May 2020 ban, and similar weapons that have come on the market since then.
“These new models that entered the market remain legal, available and mostly non-restricted from what we can see,” Provost said.
The Criminal Code amnesty for owning prohibited assault-style firearms has been extended twice so far, and is now set to expire on Oct. 30, 2025. The regulations allowing these firearms to be mailed expires on the same date.
This report by The Canadian Press was first published Oct. 25, 2024
Note to readers: This is a corrected story. A previous version stated that the gun buyback program applied to restricted firearms.
COLUMBUS, Ohio (AP) — The most far-reaching of Ohio’s laws restricting abortion was struck down on Thursday by a county judge who said last year’s voter-approved amendment enshrining reproductive rights renders the so-called heartbeat law unconstitutional.
Enforcement of the 2019 law banning most abortions once cardiac activity is detected — as early as six weeks into pregnancy, before many women know they’re pregnant — had been paused pending the challenge before Hamilton County Common Pleas Judge Christian Jenkins.
Jenkins said that when the U.S. Supreme Court overturned Roe v. Wade and returned power over the abortion issue to the states, “Ohio’s Attorney General evidently didn’t get the memo.”
The judge said Republican Attorney General Dave Yost’s request to leave all but one provision of the law untouched even after a majority of Ohio’s voters passed an amendment protecting the right to pre-viability abortion “dispels the myth” that the high court’s decision simply gives states power over the issue.
“Despite the adoption of a broad and strongly worded constitutional amendment, in this case and others, the State of Ohio seeks not to uphold the constituional protection of abortion rights, but to diminish and limit it,” he wrote. Jenkins said his ruling upholds voters’ wishes.
Yost’s office said it was reviewing the order and would decide within 30 days whether to appeal.
“This is a very long, complicated decision covering many issues, many of which are issues of first impression,” the office said in a statement, meaning they have not been decided by a court before.
Jenkins’ decision comes in a lawsuit that the ACLU of Ohio, Planned Parenthood Federation of America and the law firm WilmerHale brought on behalf of a group of abortion providers in the state, the second round of litigation filed to challenge the law.
“This is a momentous ruling, showing the power of Ohio’s new Reproductive Freedom Amendment in practice,” Jessie Hill, cooperating attorney for the ACLU of Ohio, said in a statement. “The six-week ban is blatantly unconstitutional and has no place in our law.”
An initial lawsuit was brought in federal court in 2019, where the law was first blocked under the landmark 1973 Roe v. Wade decision. It was briefly allowed to go into effect in 2022 after Roe was overturned. Opponents of the law then turned to the state court system, where the ban was again put on hold. They argued the law violated protections in Ohio’s constitution that guarantee individual liberty and equal protection, and that it was unconstitutionally vague.
After his predecessor twice vetoed the measure citing Roe, Republican Ohio Gov. Mike DeWine signed the 2019 law once appointments by then-President Donald Trump had solidified the Supreme Court’s conservative majority and raised hopes among abortion opponents.
The Ohio litigation has unfolded alongside a national upheaval over abortion rights that followed the Dobbs decision that overturned Roe, including constitutional amendment pushes in Ohio and a host of other states. Issue 1, the amendment Ohio voters passed last year, gives every person in Ohio “the right to make and carry out one’s own reproductive decisions.”
Yost acknowledged in court filings this spring that the amendment rendered the Ohio ban unconstitutional, but sought to maintain other elements of the 2019 law, including certain notification and reporting provisions.
Jenkins said retaining those elements would have meant subjecting doctors who perform abortions to felony criminal charges, fines, license suspensions or revocations, and civil claims of wrongful death — and requiring patients to make two in-person visits to their provider, wait 24 hours for the procedure and have their abortion recorded and reported.
