Job vacancies have come down a little but are still elevated, the unemployment rate is near historical lows, and many businesses continue to report labour shortages. So what does all this mean for inflation? Well, as I said at the outset, inflation eased to 5.9% in January from a high of over 8% last summer.
It’s still too high, but our most recent forecast in January has it slowing steadily to around 3% in the middle of this year and reaching the 2% target next year.3 So the inflation story here in Canada has some symmetry so far: global and domestic factors combined to drive inflation up, and both will need to retreat further to get us back down to the 2% target.