Global factors primarily responsible for inflation spikes: The Toronto Star
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A number of international factors caused the inflation Canada saw since the pandemic, but those same factors and decisions by central banks are what brought it down, economists told The Toronto Star.
Supply chain restrictions are meeting consumer demand and although the Russian invasion of Ukraine has caused the price of oil to increase, businesses have adjusted, writes Alex Ballingall.
“There’s a huge downdraft on inflation because of these international factors that were so dominant before,” said James Orlando, director of economics at TD Bank.
Central banks that increased interest rates, which made it more expensive to borrow money, also helped slow economic activity, explained Thomas Torgerson, co-head of the global sovereign ratings group at Morningstar DBRS.
“Ultimately, the (central bank) policy response is what I would credit for the gradual slowdown,” Torgerson said.
And, UBC economics professor Kevin Milligan, said the government's fiscal goal to limit the deficit to $40 billion, also helped to lower inflation.
“They didn’t add fuel to the fire,” Milligan said, noting that the budget deficit was one to two per cent of GDP, lower than other countries. “What we saw in Canada … was frankly a fairly tight fiscal policy.”
