Introduction
Based on FXStreet, the Canadian Consumer Price Index (CPI) will have gone up by 1.8% in September. This forecasted rise indicates that inflation pressures keep building up in the economy, which often has important implications for the policy of the Bank of Canada (BoC).
Factors Influencing CPI Rise
While the problem of inflation has loomed as a persistent global concern, even the Canadian economy cannot be spared from it. The forecasted inflation in CPI will depend on the variables consisting of supply chain interruptions and high energy prices. It has thus fueled the spirit of inflationary cost for consumers, thus increasing chatter over whether the BoC has to keep it going or change its monetary policy position.
Implications for Bank of Canada
Analysts believe that higher CPIs, as predicted, will justify easing the policy measures further by the BoC. The central bank has had to do the best in swimming through the complexities of the economic shore and a high CPI might nudge it further into taking more measures for its growth.
BoC has a two-fold mandate: preserve price stability and support the economy. Therefore, if the inflation rate rises sharply, then it may compel a reconsideration of its present policies.
Consumer Behaviour and Economic Growth
In addition, the continuously rising CPI can make the consumer alter his spending behavior, therefore bringing forth a changed pattern of spending. As prices rise, consumers would be spendthrift but wisely, hence acting on the economic growth rate.
Conclusion
Official inflation data, scheduled for release in the next couple of weeks, will be important to policymakers. Having the CPI risen means the BoC might step in with more forceful measures to contain inflation expectations, thus avert letting the economy slip into stagnation.
Much more than everyone, investors and economists will be keeping their eye on these developments since they are likely to determine Canada’s trajectory toward economic recovery and even the effectiveness of BoC’s monetary policy.
