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What you need to know about inflation – CTV News

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In December before the Surrey Board of Trade, Deputy Bank of Canada Governor Toni Gravelle spoke of how our economy has come a long way since the pandemic struck and essentially shut the economy down. We are “well down the road to a full recovery,” he said. “But we are still feeling the impacts of the pandemic.”

Gravelle outlined the bank’s top two concerns were supply shortages and the elevated rate of inflation.

Whether it be food, gas, or housing prices, inflation is becoming a global concern during the pandemic. In a recent Nanos survey, inflation and cost of living were listed as the top source of anxiety. In fact, the poll found that Canadians are nearly nine times (87%) more likely to say they’re worried more about higher prices for everyday goods rather than higher interest rates (10%). 

Ahead of the Consumer Price Index (CPI) numbers due to be released on Jan. 19, CTVNews.ca spoke with experts and included a few graphs below to explain why inflation is on top of everyone’s mind, how the pandemic has impacted it, and how Canada compares on that front with G7 nations.

What is inflation and why does it matter?

The consumer price index, better known as CPI, is the most common system to gauge inflation. It measures the cost of living by looking at the prices of goods and services that people typically buy such as food, housing, transportation, furniture, clothing, recreation, and other items.

Like most central banks, the Bank of Canada monitors “core inflation” that focuses on the underlying trend of inflation, looking through the short-term fluctuations or temporary shifts in the total CPI.

The current inflation is 4.7 per cent, significantly higher than the top of the Bank’s inflation-control range. The Bank of Canada aims to keep inflation at the 2 per cent mid-point of an inflation-control target range of 1 to 3 per cent. Low and stable inflation contributes to sustainable economic growth. The balance between the demand and the economy’s production capacity determines inflation.

The Bank becomes concerned if the inflation rises above or falls below the 2 per cent target. A high inflation reduces the purchasing power of a household or an individual and can significantly impact household budgets. High prices can change our shopping habits, investments, travel, transport, and even medical expenses.

Negative rates often create a period of deflation, which means a decline in the prices of goods and services, giving more purchasing power to consumers. While falling prices sound like a good thing, a persistent decline in prices can negatively impact an economy. The effect is negative for debtors who have failing businesses or have declining income since the real value of debt payments for them can increase. In the same way, if prices and income fall, tax revenues can fall and impact government spending. One major example of sustained deflation in Canada was in the Great Depression of the 1930s.

How is inflation monitored?

The Bank of Canada conducts monetary policies to ensure the inflation target is maintained. It usually takes about six to eight quarters to see the impact of the tools used to combat inflation and that’s one reason that monetary policies are always forward-looking.

The Bank relies on different tools to control the money supply in the market such as large asset purchases (quantitative easing and credit easing), funding for credit measures, and negative policy rates.

To stimulate the economy and encourage borrowing, spending, and investment, the central bank can resort to an unconventional tool known as the negative policy rate where it sets its target nominal interest rate to less than zero per cent. In the light of the 2008 subprime mortgage crises, several nations such as Japan and Europe had resorted to zero policy rates.

However, pushing rates to below zero impacts short-term interest rates and can eventually affect mortgages, lines of credit, and other, longer-term interest rates that matter to average Canadians. The Bank of Canada uses other tools such as quantitative easing to support low policy rates. Quantitative easing is when central banks pay for bond purchases with settlement balances (not bank notes). The Bank buys bonds that have already been sold by the government to banks and other financial institutions. In credit easing, the Bank can also buy corporate bonds from financial institutions, which can support the economy, making it cheaper for companies to invest and create more jobs.

All these policies indirectly affect the total demand for Canadian goods and services.

Impact of the pandemic on inflation

With the new variants, the pandemic has taken an unprecedented turn. When compared to other advanced economies, Canada’s inflation is on the lower end. The U.S. has recorded an inflation rate of 7 per cent, the highest since 1982. Leading contributors to the U.S. inflation were housing, cars, and trucks. According to a survey of 900 global CEOs, rising inflation, labor shortages, supply chain disruptions, and changing consumer behaviors were top worries.

Due to factors such as rising demand for oil and gas, the shortage of many goods, supply shortages, the cost of living in the U.K. rose by 5.1 per cent, the highest in 10 years. A recent survey by the British Chambers of Commerce said that 58 per cent of firms expected their prices to increase in the next three months, the highest on record. Of those surveyed, 66 per cent of businesses cited inflation as a concern.

Energy prices and supply rate disruptions have pushed inflation in Europe’s second-largest economy, France as well.

One of the biggest impacts of the pandemic has been on the supply chain, which is pushing inflation globally and in Canada as well, driving up everything from cars and furniture to food and shelter.

“Supply chain networks have been disrupted globally,” Sal Guatieri, senior economist and director at BMO Capital Markets told CTVNews.ca on Monday.

He said factories are getting closed either due to a shortage of staff because people are sick or under quarantine. This indirectly impacts the steady supply of raw materials that are used in the manufacturing process globally.

Guatieri said at the same time the cost of freight across oceans has increased due to the shortage of truck drivers. So all these costs are getting passed on to the consumers. But aside from the supply chain disruptions, inflation is also impacted by several other factors such as food prices, gasoline prices, house prices, homeowner replacement costs, energy prices, and motor vehicles costs. In 2021, global food prices rose ‘sharply’, according to a recent report by United Nations (UN). The agency’s Food Price Index, which tracks monthly changes in international prices showed a 28% increase over 2020. The reason for this jump was the high cost of inputs, ongoing pandemic, and volatile climatic conditions.

Guatieri said a source of upward pressure on inflation has been a rebound in some of the hard-hit service areas such as travel and car prices. Hotel costs and airfares have climbed in the past year and could be a source of upward pressure on inflation. Car prices have been impacted by chip shortages, resulting in the highest costs and shortage of new vehicles. Gualtieri said homeowner displacements costs could be a big source in driving up inflation. With house prices accelerating, more people could be pushed into the rental market because they can’t afford a home, he added. 

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Nova Scotia election debate: Leaders clash over pace of health-care improvement

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HALIFAX – Nova Scotia’s NDP and Liberal leaders attacked Progressive Conservative leader Tim Houston’s claims of reviving the province’s ailing health-care system, citing patient horror stories during a televised debate Thursday.

As Houston stuck to his argument that his government inherited “a mess” that it has started to stabilize, Liberal Leader Zach Churchill responded by saying that the number of people on a wait list seeking family doctors has gone from 60,000 when the Liberals governed to recent figures of about 145,000.

“If we continue on this track, there are going to be half a million people in this province without a doctor, and that’s going to be devastating for the health system and for people’s health,” said Churchill.

Houston countered by saying the system had crumbled under 12 years of NDP and Liberal governments, arguing. “We were taking over from parties that were inactive in health care.”

The Progressive Conservative leader — who is running for a second term in the Nov. 26 election — conceded improvement to the system “is taking time,” while saying that since 2021 there has been a net gain of 250 doctors, with more coming through programs to train physicians and speed up certification for foreign-trained doctors.

He said that there are one million more “appointment opportunities” for patients than when his government took office, as his government has opened more clinics and allowed health-care professionals such as pharmacists to take on wider scopes of practice.

However, NDP Leader Claudia Chender responded by telling the story of a young mother who waited for 14 hours with her feverish child in an emergency room, saying this is “completely unacceptable and it’s because of a lack of primary care.” The NDP is promising to create 15 collaborative care clinics in its first year of government.

During an exchange with Houston, Churchill claimed that despite hundreds of millions in added spending on health, “there are more mice than staff” at Halifax’s Victoria General hospital.

Chender also sharply criticized Houston after he noted a health-care app pioneered by the Tories had “opened up access” to care for people facing a mental health crisis in the middle of the night. The NDP leader said, “what we need is actual resources to help people when they need it.”

The debate hosted by CBC grew lively over Houston’s argument that his government would be the most effective in reducing inflation because he has opposed implementing carbon pricing on fuel.

“I am the only one that will stand up to the carbon tax. I know the Liberals want a carbon tax under a different name. It’s still a carbon tax, it impacts the price of everything. The best thing we can do with affordability … is stand up to the carbon tax,” he said.

Chender said she found it ironic that Houston was saying he was the voice of action, “when all you do is blame Ottawa for the challenges that people are facing today in Nova Scotia.”

Churchill, meanwhile, noted the “carbon tax is still here …. We will end the carbon tax by bringing in a cap-and-trade system that will do our part to reduce emissions, give money back to you so you can pay for your heat pumps, get rebates for your electric vehicles and it will also take 10 to 15 cents off at the pump.”

“Mr. Houston would rather kick and scream and whine than actually do his job and negotiate a better deal for you,” said the Liberal leader.

That led to the assertion by Houston — one he has made frequently during the campaign — that he alone is untethered to a federal party.

“I’m the only leader on this stage that is only looking out for the interests of Nova Scotians and not beholden to a political party. The NDP are beholden to Jagmeet Singh in Ottawa, the Liberals are beholden to Justin Trudeau in Ottawa. I am only beholden to Nova Scotians,” he said.

At the dissolution of the 55-seat legislature, the Progressive Conservatives held 34 seats, the Liberals had 14 seats, the NDP held six and there was one independent member. Recent polls show the Tories with a sizable lead over the other two parties.

The debate also included some sharp exchanges over Houston’s credibility after he jettisoned several promises made in the last election.

The Progressive Conservative leader said, “Everything that I tell you, I believe in my heart we can do …. I believe I’ve shown Nova Scotians that when new information comes available or when I can see that I’m wrong, I have the courage to change path.”

But Churchill responded that Houston’s failure to keep a promise to hold the election on a fixed date — which would have been next summer — was a signal he’s more interested in gaining power than being accountable.

“This election is not about you, it’s about him,” he told viewers.

The Liberal leader said he would not seek re-election if he were unable to keep his promises. “Even through the hard times when the public pressure shifts and the headlines get bad, you can’t govern like a wet noodle in the wind,” he said.

This report by The Canadian Press was first published Nov. 14, 2024.

— With files from Keith Doucette.



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Trudeau to attend APEC in Peru, G20 summit in Brazil as peer nations brace for Trump

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OTTAWA – Prime Minister Justin Trudeau has arrived in Lima, Peru, where he will attend the APEC summit before heading to Rio de Janeiro, Brazil, for the G20.

Both summits aim to improve the multilateral institutions that have drawn skepticism from U.S. president-elect Donald Trump.

In Peru, Trudeau will take part in meetings of the Asia-Pacific Economic Cooperation group, which largely involves resolving barriers to trade and forming better links across the Pacific Rim.

On Sunday, the prime minister will leave for Brazil for the G20 summit, for discussions ranging from the war in Ukraine to artificial intelligence and ending hunger.

Both summits will involve meeting with other heads of government in formal meetings as well as side conversations.

Analysts say it will be key for Canada to try to retain strong ties with numerous countries, as the looming Trump administration plans to raise tariffs and could disrupt global trade flows.

Trudeau is travelling with his daughter, Ella-Grace, 15.

This report by The Canadian Press was first published Nov. 14, 2024.

Note to readers: This is a corrected story. A previous version said Trudeau will be flying to Brazil on Saturday.

The Canadian Press. All rights reserved.



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Trudeau in Peru for APEC meeting as leaders seek to reinforce multilateralism

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OTTAWA – Prime Minister Justin Trudeau is in Peru, kicking off five days of meetings with leaders from around the globe as the world braces for the looming return of U.S. president-elect Donald Trump.

The meetings come as emerging powers like China vie for influence in South America, and as Canada clings to global trade blocs and multilateral systems under pressure from populist leaders.

In Lima, Trudeau is attending an Asia-Pacific Economic Cooperation summit, or APEC. The group focuses on resolving trade barriers and forming better links across the Pacific Rim. He’ll then head to Brazil for the G20 leaders’ summit of the world’s biggest economies.

Vina Nadjibulla, research vice-president for the Asia Pacific Foundation, said there’s lot to criticize about both summits, from who gets to attend to how productive they tend to be. But she stressed they are crucial for Canada navigating its place in a shifting world.

“Our prosperity depends on this,” she said.

“As things are shifting, there’s a lot of anxiety and we need to be at the table in reshaping the international trade order and reshaping the international economic order.”

Trudeau is set to take part in meetings Friday with guest countries invited by the Peruvian hosts, and the prime minister will give a lunchtime speech to delegates. The afternoon will involve meetings with various national and business leaders, including at an event focused inclusive growth and environmental sustainability.

APEC played a role in the creation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, a trade deal representing a massive area of countries along the Pacific Rim, from New Zealand to Chile. Canada ratified the agreement in 2018.

The U.S. was part of forming the trade pact, but Trump withdrew Washington from it on his first day in office in 2017. His successor, current U.S. President Joe Biden, never rejoined the pact, in a sign of cross-partisan weariness among Americans toward globalization.

Nadjibulla said the looming Trump presidency likely means a reduced role for the U.S. in multilateral institutions and fighting climate change, as well as greater tension with China over trade, tariffs and technology.

Canada is currently chairing the CPTPP trade bloc, and next year will be hosting the G7 summit of advanced economies, culminating in a leader’s summit in Alberta. This means Trudeau will be pushing to preserve rules-based trade “that is critical to our prosperity” over the coming days, Nadjibulla said.

“APEC is meeting in the context of rising protectionism, intense geopolitical competition, uncertain economic growth and the Trump election,” she said.

“It’s really quite different from the founding vision of APEC, which is all about trade liberalization (and) deeper economic integration. APEC was essentially a product of an era of hyperglobalization, which is definitely coming to an end.”

APEC meetings also give leaders a chance to meet when they are unlikely to visit each other’s countries, such as in San Francisco last year when Chinese President Xi Jinping and Biden smoothed out diplomatic tensions caused by surveillance balloons and restrictions on microchip usage.

Canadian officials have been mum on the prospect of Trudeau meeting with Xi, either in a formal sit-down or an informal hallway chat.

Foreign Affairs Minister Mélanie Joly went to Beijing in July, which could set the stage for Trudeau to do so on this trip, but Nadjibulla said the Chinese leader is likely more focused on other leaders at both summits.

“The tone and the rhetoric, I think, will escalate in the coming months, partly because of the actions that the U.S. is likely to take, and Canada will have to stay aligned with that,” Nadjibulla said.

Media in India are also speculating as to whether Indian Prime Minister Narendra Modi will meet with Trudeau, though Nadjibulla said that’s unlikely given Modi’s government blaming the Trudeau government and not Canada as a whole for heightened tensions.

Nadjibulla stressed that Canada is a respected nation in the region, including in Peru.

“We’re not a small player, because of our historic engagement particularly in the mining sector. And we can play an important role in shoring up the Western presence at the meetings.”

More than a dozen Canadian business leaders are attending the summit, as industry looks to expand commerce in the region involving critical minerals and clean technology.

On Sunday, the prime minister will leave for Brazil for the G20 summit, for discussions ranging from the war in Ukraine to artificial intelligence and ending hunger.

The Group of 20 includes leaders ranging from long-standing allies such as French President Emmanuel Macron, to populist firebrands like Argentine President Javier Milei, who just withdrew his negotiators from the annual UN climate talks underway in Azerbaijan.

John Kirton, head of the G20 Research Group, expects Trudeau and many leaders to have informal talks on the sidelines to make sense of how to navigate another Trump presidency.

“Trudeau will be in a relatively privileged position, because he’s been with Donald Trump at (several) summits, and we’re the next-door neighbours; we’re a front-line state,” he said.

His team, based out of the University of Toronto, will be closely watching for what the ending communiqué has to say about global trade, with Trump promising protectionist policies.

Trump has vowed to implement high tariffs that have been panned by economists. The London School of Economics warned last month these policies would likely hurt the economies of the U.S., China and the European Union.

Nadjibulla said it’s crucial that governments like Canada avoid fatalism, and remember that Trump’s promised policies might look different when they’re actually implemented.

“There is room and opportunity for economies and countries to co-ordinate and try to shape common responses to what they perceive to be a threat,” she said.

“These multilateral gatherings are still the best that we have. And we have to do everything we can to make them more relevant and better fit to address today’s challenges.”

This report by The Canadian Press was first published Nov. 15, 2024.



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