OTAWA – Rising gas prices helped boost annual inflation in May to a nearly 40-year high as rising living costs for Canadians squeezed household budgets and boosted expectations that the Bank of Canada would opt for an oversupply of interest rates next month.
The Statistics Canada announced on Wednesday that its consumer price index rose 7.7 percent in May from a year earlier, the fastest pace since January 1983, when it gained 8.2 percent.  This is almost a percentage point from the 6.8% gain in April.
TD Bank CEO Leslie Preston said a generation of Canadians was experiencing high inflation for the first time.
“If you are not over 40, you have never experienced such inflation and unfortunately, we do not expect much relief in the future,” Preston wrote in a report.
The May count came as energy prices rose 34.8 percent from a year earlier, with gasoline prices up 48.0 percent from a year earlier.  Excluding gasoline, annual inflation rose to 6.3 percent in May from 5.8 percent in April.
The Bank of Canada has raised its key interest rate three times so far this year to bring it to 1.5%, in a bid to bring inflation under control.
He also said he was ready to “act more vigorously” if needed, leading economists to speculate that he could raise interest rates by three-quarters of a percentage point next month, in contrast to the US Federal Reserve’s move last week.  .
Desjardins chief economist Jimmy Jean said more than three-quarters of inflation components rose more than 3%, the upper end of the Bank of Canada’s target range.
“We have a record low unemployment rate, rising wages, so an economy that is really above its current capacity and is really in the backyard of central bankers,” Jean said.
“You could argue that there is nothing we can do about supply chains and the pandemic and you know all the supply shocks that have happened, but when it comes to domestic demand and there is too much demand for the supply level, this is really their responsibility “.
The average of the three key inflation measures closely monitored by the Bank of Canada rose to 4.73 percent in May from 4.43 percent in April.
Bank of Canada Deputy Chief of Staff Carolyn Rogers said Wednesday that inflation is hurting Canadians and making things unbearable.
“We know that inflation keeps Canadians awake at night, it keeps us awake at night and we will not be quiet until we get back to our target,” Rogers told a Toronto event.
“We have been clear since then, the economy is in excess of demand, inflation is very high, rates have to go up.”
In May, Statistics Canada reported that the price of in-store food increased by 9.7 percent year-on-year, up from a year earlier, as the cost of almost everything in the grocery basket rose. .
The cost of edible fats and oils increased by 30.0 percent compared to a year ago, the largest increase ever recorded, mainly due to higher prices of cooking oils.  Prices of fresh vegetables increased by 10.3%.
Service costs also rose 5.2 percent in May from a year earlier, up 4.6 percent in April as Canadians traveled and ate at restaurants more often.
Prices of travel accommodation increased by 40.2 percent compared to a year ago, while the price of food bought from restaurants increased by 6.8 percent.
Royal Bank Assistant Chief Economist Nathan Janzen said that while much of the growth came from higher energy and food prices, cost pressures were widening into a wider range of goods and services.
He said the danger when price pressures drag on a wider range of goods and services is that consumer and business expectations for prices do not materialize.
“When that happens, it is an environment where it is much more difficult for central banks to bring inflation back under control,” he said.
– With archives from Ian Bickis in Toronto.
This Canadian Press report was first published on June 22, 2022.