Canadians' wages are finally growing faster than prices as inflation continues to ease, but that isn't necessarily good news for economists who worry high wage growth might stand in the way of bringing inflation back down to the two per cent target.
Statistics Canada's consumer price index report set to be released Tuesday is expected to show inflation slowed once again in April.A combination of easing global pressures and higher interest rates have brought inflation down significantly since last summer in both Canada and the U.S. Here in Canada, the inflation rate has been nearly halved, slowing from a peak of 8.1 per cent to 4.3 per cent in March.
The Bank of Canada is forecasting inflation will fall to about three per cent in the coming months. The path to two per cent inflation is expected to be much longer, however, as the central bank expects inflation to return to target by the end of 2024. The performance of the Canadian labour market has been somewhat of a mystery to economists. Forecasters have been surprised time and again by stronger-than-expected job gains, while the unemployment rate holds steady at five per cent.
That tight labour market, the central bank argues, is a sign of an overheated economy that's fuelling inflation. Recently, thousands of federal workers who walked off the job secured tentative agreements with the federal government that include significant wage increases meant to compensate for inflation. These workers, represented by the Public Service Alliance of Canada, will receive a 12.6 per cent compounded raise over four years in addition to a $2,500 lump-sum payment.
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