But much of the inflation we are experiencing reflects domestic factors—namely, excess demand in the Canadian economy. Our economy is overheated. Job vacancies are elevated, and businesses are reporting widespread labour shortages. Over the last six months, wage growth has increased and broadened across the economy.
The unemployment rate in June hit a record low—and while that seems like a good thing, it is not sustainable. The tightness in the labour market is a symptom of the general imbalance between demand and supply that is fuelling inflation and hurting all Canadians. Since March, we have been raising our policy interest rate to help bring inflation back to our target.