Inflation in Canada is still high, but heading to the right direction

Country’s inflation rate is still high, but there are positive changes, as the Bank of Canada claims. The central bank's key objective is now to get hikes back to the target.

"As for August, the inflation rate in Canada reached 7%. Despite the positive trend, this level is still high," said Paul Beaudry, deputy governor of the Bank of Canada.

"We keep on taking all necessary measures to restore price stability for both households and businesses. Meeting our mandate to bring inflation down to the 2% target is also important," he noted.

Some politicians are convinced the economy needs a recession in order to avoid the adverse effects of rising prices. However, the Bank of Canada claims the current period of high inflation to be a temporary phenomenon, and, as a result, it would be able to curb rapid price hikes.

"Growth rate points to two scenarios: the Bank of Canada is likely to decide whether to prevent a recession or control inflation. With that being said, it is clear the choice is in favor of the latter," said Royce Mendes, head of macrostrategy at Desjardins Group.

The central bank has already raised interest rates by 300 basis points during the last six months. Earlier, the regulator also noted there is a possibility of further increases. Thus, financial markets expect a 50 basis-point hike in October, where the rate could subsequently reach 3.75%.