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Canada’s inflation rate jumped to its highest level in nearly 40 years in May, according to Statistics Canada.
The agency said the consumer price index in May rose to 7.7 per cent, up from 6.8 per cent in April.
The inflation rate is the highest since January 1983, when it was 8.2 per cent.
Jason Childs, a professor of economics at the University of Regina, says tough decisions need to be made to get the problem under control.
“Somebody somewhere is going to have to accept the lower standard if we’re going to get this thing back to where it was,” he said. “And if we choose not to get inflation back to where it was, then that changes who suffers that lower standard of living.”
Childs says an ideal rate would be between one and three per cent and that the longer we’re away from our target, the more difficult it will be to get it under control.
“The longer this goes on and the more we miss our target, the harder it’s going to be to get back to the target,” Childs said. “It all depends on the policy reactions and the reactions of consumers.”
The Bank of Canada is expected to raise its benchmark interest rate in July as a result of the increased rate.
Childs says all of this is a new experience for many Canadians.
“Even people who are 40 have no real adult experience with inflation,” he said. “That’s going to make it harder for people to adapt and adjust.
“It probably takes longer for the problem to be resolved.”
Childs also touched on the federal government’s $8.9-billion affordability plan to curb inflation, saying it doesn’t get to the root of the problem.
“It means the cost is going to fall even more on the people who are renewing variable rate mortgages,” he said. “This is a really tough spot we put ourselves in.”
Ultimately, Childs says the federal government needs to reduce its spending sooner rather than later to address the problem at hand.