Core inflation is also being pushed up by strong demand for housing. All told, core inflation is expected to peak at about 3 per cent by the end of this year.
Domestic demand is expected to be relatively strong, providing a base of support for some sectors. Corporate balance sheets are in outstanding shape, and margins have held up very well for this stage in the economic cycle. In addition, Canada’s overall financial conditions are now contributing to, rather than retarding, the recovery.