Many Canadians are hard hit by the highest inflation rate in several decades, but, small consolation, a global comparison shows that the country is in a better position than many other powers.
In Canada, the annualized inflation rate fell from 8.1% in June to 6.9% in October.
Although this rate remains higher than the Canadian target, which is 2%, it is well below that of the United States, the United Kingdom and the European Union.
Douglas Porter, senior economist at the Bank of Montreal, argues that the comparison game is tricky because not all countries calculate the rate of inflation the same way. However, he believes that Canada is doing better at the moment.
“Even taking this into account, we must remember that inflation in Canada is lower than that of the main world economic powers,” he said.
Mr. Porter notes that the leaders in this area are Switzerland, Japan and China, where inflation is stagnating at 2% to 3%.
In the United States, the pace of inflation seems to have eased in October. It stood at 7.7%, which pleasantly surprised the experts.
The economist attributes the stronger inflationary pressure in the United States to two causes: a faster post-pandemic recovery and a more aggressive fiscal policy for the recovery.
Mr. Porter points out that inflation is particularly high in Europe because of its dependence on Russian energy resources.
The inflation rate in the United Kingdom rose to 11.1% in October, its worst result in 41 years. In the European Union, the situation is hardly rosier, since inflation is at 10.6%.
Europe imposed sanctions on Russia following the invasion of Ukraine. In retaliation, Moscow cut off its natural gas supply, raising fears for the onset of winter temperatures.
“That’s the main reason why the inflation rate in Europe is so much higher than in North America,” says Douglas Porter.
Central banks have responded by raising interest rates, a policy aimed at slowing economic growth.
Some have criticized the Bank of Canada for waiting too long to follow suit. However, Mr. Porter believes that she was faster and more dynamic than her peers.
“The Bank of Canada did it earlier than other central banks. That’s why our inflation is a little lower here,” he says.
The Canadian central bank has raised its key rate six times in a row since March. It rose from 0.25% to 3.75% during this period. Its governor, Tiff Macklem, has already warned Canadians that other hikes could be announced.
The US Federal Reserve also started raising its key rate in March. This amounts to 4%.
The Bank of England and the European Central Bank show a key rate of 3% and 1.5% respectively
Porter argues that even more aggressive action by Canada’s central bank and the US Federal Reserve could slow inflation even further.
He warns that the path will not be easy.
“We have to prepare for a long struggle to get inflation under control,” he says.