Inflation Rate Canada

Recent information regarding inflation rate Canada, uncovered Canada’s inflation rate and the effect it caused on its economy. It was revealed that Inflation rate in Canada was static at 2.2 % in the month of March, 2007. The consumer price index or the CPI, which is the main inflation measuring tool showed an escalation of 0.5% every month. This rise can be attributed to the hike in the price of gases. The headline inflation rate in Canada is anticipated to increase. This increase is likely to be as a result of soaring gasoline costs.

Anti Inflation Act:

The Anti Inflation Act applied breaks in government expenses and exercised stringent fiscal and monetary policies. In the year 1974, the consumer price index or the CPI had attained the 10.7 percent mark. Similarly, 10.9 percent was the consumer price index reached in the year 1975. The reason for the increase in consumer price index was price inflation as well as increase in wages. To compensate for the increase in prices, the trade unions went on strike to demand higher wages.

In the history of Canadian economy, this period is recognized as the only period, when price rise as well as wages registered this kind of inflation in peacetime. For this reason, the Anti Inflation Act was introduced in Canada. In addition to increase in wages as well as price rise, there were other factors, which led to the inflation rate in Canada being in form of double digits. Other factors included, rise in cost of oil, real estate, food. The Bank of Canada, being the central bank of the country, cautioned the government about Canada’s position in the global market. The bank also expressed concern that if inflation rate in Canada, follows this trend, it would not be able to compete globally. To nullify the ill effects of inflation, the Act was introduced.

Inflation rate in Canada and economic performance:

History of Canada has witnessed high fluctuations in the consumer price index. There were times, when inflation rate in Canada used to range between 4% to 14% during the period 1966 through 1990. Canada witnessed “twin peaks” of inflation between the years 1966 through 2004. To a young Canadian, this may be history as they have experienced more or less stable inflation rate in Canada or may have experienced low inflation rate. We know, inflation causes a lot of uncertainty. This uncertainty is very harmful for the economy of any nation. It has often been suggested by several economists that if inflation rate in Canada, is predictable (expected inflation), it should not be a source of concern. This is because inflation adjustment can offer a solution. However, globalization has opened many vistas . Even if the developed countries incorporate inflation adjustments in their agenda, the developed nations still have to gear up to do the same. With this inequality and unequal pace of development, inflation adjustment cannot be a possible solution for inflation rate in Canada pertaining to all sectors of the economy. The uncertainty can be made null and void to a large extent by making efforts to reduce inflation rate in Canada and also globally. By doing so, one can be assured of the value of currency remaining constant. The moment a currency loses its purchasing power, all the troubles follow suit.