The article discusses the current economic situation in Canada, particularly the inflation rate and its implications. Here are the main points:
Inflation Rate: The Consumer Price Index (CPI) has increased by 5% in May from a year earlier, which is the largest gain since 2008.
Bank of Canada’s View: Deputy Governor Timothy Lane stated that most of the run-up in inflation is due to "base-year effects," which are transitory and will not persist beyond a few months. He also mentioned that underlying slack in the economy, such as unemployment and idle capacity, will continue to put downward pressure on inflation.
Idle Capacity: Statistics Canada reported that many industries retain some idle capacity, but construction was using 92.4% of its capacity, which is the most since 1990.
Risks: Lane acknowledged that the Bank of Canada could be wrong about prices and that there are potential risks to the outlook, including more persistent cost pressures pushing up inflation.
Comparison with US Inflation: The article notes that while Canadian CPI is headed in the same direction as the US numbers, the correlation is not perfect.