The ease with which the U.S. and Canadian economies recover from the coronavirus-caused economic downturn is very much going to depend on whether we can escape without a significant upsurge in inflation.
Over the next six months to a year, everyone in my profession will be keeping an eagle eye on how prices are performing.
For the moment, general price inflation, as represented by Consumer Price Index (CPI) numbers, remains restrained, although there are some indications that ‘all item’ and ‘core’ values are flirting with +2.0% year over year. For example, in Canada, two of the three ‘core’ measures monitored by the Bank of Canada now do sit at +2.0% y/y. The third BoC ‘core’ measure is +1.3% y/y (see lower text box in Chart 5).
