And it is affecting more vulnerable members of society the most, both because they spend all their income and because prices of essential items like food and energy have risen sharply. This broadening in price pressures is a big concern. It makes it more difficult for Canadians to avoid inflation, no matter how patient or prudent they are as shoppers.
This brings me to my third point—interest rates are increasing. The economy needs higher rates and can handle them. With demand starting to run ahead of the economy’s capacity, we need higher rates to bring the economy into balance and cool domestic inflation. We also need higher interest rates to keep Canadians’ expectations of inflation anchored on the target.