The war in Ukraine, in particular the heightened uncertainty about the Black Sea grain deal and the flooding caused by the destruction of the dam in the Kherson region, poses further upside risks to food inflation. New research by the Federal Reserve Bank of St. Louis suggests that food price inflation matters.
And, although we still have material slack in our labour market, the market’s fundamentals have begun to improve. Even so, companies remain cautious about new investment and hiring intentions. Weighing these various forces acting on the economy, we are anticipating a rebound in growth in the second quarter, and a move to above-trend growth thereafter, for annual growth of 1.9 per cent this year.