While there may not be any easy short-term inflationary remedies, Concordia University economist Moshe Lander assures that “the end is in sight.”
“The best thing we can do at this point, even though it sounds horrible, it’s terrible, is for us to just sit and work this problem out and just figure out how to get over it,” he told CTV’s Your Morning on Thursday. .
“If we can get through COVID, we can get through the raw inflation patch in a year.”
The annual inflation rate in May rose to its highest level in nearly four decades, with Statistics Canada reporting a 7.7% increase from a year ago.
Energy prices increased by 34.8% year-on-year, of which gasoline prices increased by 48%. Excluding gasoline, the annual inflation rate in May rose to 6.3% from 5.8% in April.
The Bank of Canada has raised its key interest rate target three times so far this year, raising it to 1.5%, in an effort to contain inflation.
The news comes amid a report from Scotiabank on Sunday in favor of reducing government spending to help lower inflation.
“To be fair, fiscal policy regulators in Canada are doing nothing meaningful to slow inflation at the moment,” the report said.
Lander said that while cutting government spending would be the right policy to take, this position would lead to “political suicide”.
“People won’t hear it as the correct solution,” he said. “I think what people want right now is for governments to put money in their pockets to help with rising gasoline prices, rising rents and housing costs, and so the idea of policy implementation quite the opposite, even though it’s the correct policy, would actually be politically unpopular.”
As gas prices rise, economists and others have pushed for temporary relief from gas tax collection, a move that some Canadian provinces and US states have adopted.
“That really won’t have much of an impact on inflation,” argues Lander.
“It’s a pretty picture for Canadian consumers but it’s not going to do much and the problem with it is that it conflicts with government policy on the environment. So I don’t know that’s accurate. is the solution that will solve the problem of inflation.”
A senior member of the Macdonald-Laurier Institute told CTVNews.ca in March that while it’s politically good, a temporary halt to the gas tax would encourage consumption and lead to consumption countering demand. , or when the price of a product is literally so high. kills the need for it.
With files from CTV News and The Canadian Press