The latest numbers show inflation has cooled faster than expected. The August Consumer Price Index was up 7% over last year — less than the 7.3% that had been forecast. Core inflation was also lower than expected.
The drop in inflation comes after the Bank of Canada raised interest rates. However, it will take more than numbers to stem inflation and get Canada's economy back on track, said the bank's Deputy Governor Paul Beaudry.
"Some have suggested that policy-makers need to engineer a substantial slowdown — or even a recession — to get inflation back under control," Beaudry said in a speech on Tuesday. "But the best strategy for responding to high inflation needs to consider how people form their inflation expectations. If people understand and believe that the central bank will eventually bring inflation back to target, their expectations will remain 'anchored.'”
Businesses and employers can help by moderating increases to prices or wages, with the understanding that inflationary pressures are temporary. Not an easy task for organizations facing increasing costs and still recovering from pandemic challenges.
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