So: inflation is at the highest level in about 30 years.
In today's Globe and Mail, there are two interesting articles
On politics of inflation: the opposition party knows that high inflation is government's fault
There is a good explanation of what may happen:
"High inflation, which has been off the Canadian political radar for best part of three decades, is the ultimate pocketbook issue. A sharp jump in the general price level erodes the buying power of a dollar and cuts into [real] wages. Central banks typically respond by raising interest rates to reduce demand in the economy, meaning that mortgage rates and other debt servicing costs are almost certainly going up over the next year."
More importantly: how inflation becomes entrenched
"Already, the country’s largest public-sector union, the Public Service Alliance of Canada, is warning that it expects wages to keep up with what it calls “soaring” inflation when it negotiates contracts for 110,000 civil servants in 2022. They’re asking for raises of 4.5 per cent each year for three years. Talks start in January.
PSAC members won’t be the only ones looking for wage increases. Employees who feel they are losing purchasing power want to be kept whole. Unions will push for higher raises, not just for this year, but over the course of their contracts."
The second article nails the problem: if inflation feeds into wage contracts, then it will last. Higher wages lead to higher costs lead to higher price increases and high inflation continues.
