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What you need to know about inflation in Canada

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What you need to know about inflation in Canada

The coronavirus pandemic contributed significantly to the current economic crisis in Canada. High inflation pushed companies out of business, and thousands of Canadians lost their jobs. However, the country’s economy recovered faster from the pandemic than many observers predicted.

The wage growth was back to the pre-pandemic level, and the unemployment rate by 2021 was at an all-time low. Unfortunately, a war broke out in Ukraine, reversing all the gains.

The inflation in Canada has constricted family budgets and increased business operational costs. Economic experts warn that the inflation in Canada may reach a self-sustaining level if the war in Ukraine doesn’t end soon enough. Canadians on fixed or low income are the worst hit by inflation.

You probably wonder what could have led to the high inflation in Canada despite a promising recovery from the pandemic. Here are three causes of the high inflation in the country.

  1. Soaring Prices Of Basic Commodities

The Bank of Canada has identified the excessive demand for products as the primary driving factor for the soaring inflation. There’s a high demand for essential food products from the international market. Canada depends on the global market for essential commodities such as gas and cooking oil. Ukraine is the primary exporter of corn and sunflower oil in the international market.

However, the ongoing war in Ukraine disrupted the supply chain of these basic commodities. The disruption led to an increase in demand and price.

Canadians have contributed to inflation by purchasing highly-priced basic commodities. Sadly, inflation becomes ingrained when it feeds on itself; this is the situation in the country. The price of essential commodities increases because of the rising manufacturing and supply chain costs.

The Bank of Canada must take proactive steps before inflation becomes self-fulfilling. Businesses and households expect the prices of commodities to keep soaring. And they behave accordingly.

  1. Disruptions In The Global Supply Chain

Global economies thrive through interdependency. But the coronavirus pandemic disrupted the global supply chain. In response, the demand for essential products soared. The unpredictable global marketplace caused the high demand, and Canadians responded by increasing their spending on basic commodities.

Similarly, companies used debt to secure enough raw materials from global suppliers. The war in Ukraine exacerbated the demand for products in the international market. Low demand for the Canadian dollar in foreign exchange further increased inflation. Since domestic markets lack direct control over internationally traded goods, inflation in Canada became inevitable.

  1. The Need To Balance Trade-Offs

When inflation increased in 2021, the Bank of Canada decided to raise the interest rate for a short duration. This strategy cushioned the country from inflation shocks across the border. The principle behind it was that international inflation would subside over time. However, this was a short-term solution designed to weigh in on trade-offs.

Apart from absorbing global shock, the Bank of Canada hoped the monetary policy would restore jobs lost during the pandemic.

Unfortunately, disruptions in the supply chain and the war in Ukraine have lasted longer than expected. No one knows when the war in Ukraine will end; therefore, the global supply chain remains unpredictable.

Intervention Strategy

According to the Bank of Canada, the inflation may be too high but hasn’t reached the self-fulfilling stage. Therefore, it’s easier to bring it down at this stage before it peaks at an unsustainable level. The Bank of Canada has responded to frenzy spending by increasing lending rates in March 2022. It has increased the interest rates to curb inflation in four ways:

  • Discourage borrowing: The move will prevent Canadians from excessive and uninformed spending behaviour.
  • Encourage saving: The high-interest rates will encourage Canadians to save their money, thus stabilizing inflation and stimulating economic growth.
  • Increase the value of the Canadian dollar: The move will help reduce the demand for the American dollar in the country which is required for international purchasing.
  • Reduce the demand for products and services: The demand for goods and services is responsible for inflation in Canada. The Bank of Canada hopes to minimize the demand for goods by reducing the currency in circulation

Conclusion

The war in Ukraine is primarily responsible for Canada’s current inflation. Unfortunately, cross-border wars are unpredictable. There’s no way to predict when the war will end. Therefore, it’s difficult to tell when Ukraine shall recover from the war and stabilize its trade activities with Canada.

However, the Bank of Canada can take several proactive measures to minimize inflation before it peaks at an entrenched level. There could be risks of plunging the economy into depression. However, when monetary policies such as increasing the lending rates take effect, the Bank of Canada can tame inflation to manageable levels without hurting the economy.

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Port employers ‘refusing to bargain,’ cut off talks in less than an hour: Union

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VANCOUVER – The union for locked-out port workers in British Columbia says the BC Maritime Employers Association cut off talks in less than an hour Saturday, refusing to budge on a final offer that the union has so far rejected.

A statement from the International Longshore and Warehouse Union Ship & Dock Foremen Local 514 says a meeting with the Federal Mediation and Conciliation Service ended with the employers “refusing to bargain” and trying to “impose significant concessions” on the union.

ILWU Local 514 President Frank Morena says the employers are using “confrontational tactics” to avoid negotiating a new collective agreement, in order to force the federal government to intervene.

Morena says union negotiators were planning to bargain late into Saturday evening and through the weekend with the help of a federal mediator, but he says the employers association ended the talks after meeting with the mediator for just 12 minutes.

He says the concessions sought by port employers are “inflammatory and unacceptable,” and says shipping firms and retailers are all waiting for the lockout to end.

A statement from the employers association issued Saturday after talks broke down says there was “no progress made … and no further meetings are scheduled.”

This report by The Canadian Press was first published Nov. 10, 2024.

The Canadian Press. All rights reserved.



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Canada’s Denis Shapovalov wins Belgrade Open for his second ATP Tour title

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BELGRADE, Serbia – Canada’s Denis Shapovalov is back in the winner’s circle.

The 25-year-old Shapovalov beat Serbia’s Hamad Medjedovic 6-4, 6-4 in the Belgrade Open final on Saturday.

It’s Shapovalov’s second ATP Tour title after winning the Stockholm Open in 2019. He is the first Canadian to win an ATP Tour-level title this season.

His last appearance in a tournament final was in Vienna in 2022.

Shapovalov missed the second half of last season due to injury and spent most of this year regaining his best level of play.

He came through qualifying in Belgrade and dropped just one set on his way to winning the trophy.

Shapovalov’s best results this season were at ATP 500 events in Washington and Basel, where he reached the quarterfinals.

Medjedovic was playing in his first-ever ATP Tour final.

The 21-year-old, who won the Next Gen ATP Finals presented by PIF title last year, ends 2024 holding a 9-8 tour-level record on the season.

This report by The Canadian Press was first published Nov. 9, 2024.

The Canadian Press. All rights reserved.



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Talks to resume in B.C. port dispute in bid to end multi-day lockout

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VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.

The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.

The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.

The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.

The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.

MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.

In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.

“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.

“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”

In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.

“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.

The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.

“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”

The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.

The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.

A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.

This report by The Canadian Press was first published Nov. 9, 2024.

The Canadian Press. All rights reserved.



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