Rise in inflation rate could lead to interest rake hike, ATB chief economist warns - Action News
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Rise in inflation rate could lead to interest rake hike, ATB chief economist warns

Rising energy prices, says ATB Financial's chief economist Todd Hirsch, is the real driver behind the rising inflation rate, noting the price at the pump for gas has gone up around 25 per cent in the past 12 months.

National inflation rate rose to 3% last month, its highest since 2011

Rising gas prices are a big driver behind a rising inflation rate in Canada, says the chief economist at ATB Financial. (CBC)

Alberta's inflation rate of 3.5 per cent the highest in the country is "a bit of a surprise," says the senior economist at ATB Financial.

And it could lead to a rise in interest rates later this year, he says.

"They'll raise interest rates to kind of tap on the brakes of the economy because inflation is a good gauge. When wage pressure starts to push prices higher, that means the Bank of Canada will start to respond with higher interest rates," ATBFinancial senior economist Todd Hirsch told CBC News.

Rising energy prices, says Hirsch, are the real driver behind the rising inflation rate, noting the price at the pump for gas has gone up around 25 per cent in the past 12 months.

"We're seeing higher prices for items in stores, we're seeing higher prices for groceries," he said. "All of those things require transportation. And if we're seeing higher fuel costs, that ends up getting passed down to consumers one way or the other, through higher sticker prices for things they buy in the stores."

The bottom line, he says, is the increases could mean less money in the pockets of consumers.

"If you're fuelling up your tank with gas or you're buying groceries and you're seeing those prices increasing 3.5 per cent, year-over-year, your wages are not likely to be going up by the same amount," he said.

"That means it's going to be tougher for consumers in Alberta to make ends meet, to pay all their bills and to have any money leftover for savings or maybe for some of those discretionary spending items."

All eight components that the data agency tracks to come up with the rate were higher, and the inflation rate also rose in every single province.

Here are the annual inflation rates for the provinces:

  • Alberta3.5%.
  • Prince Edward Island3.4%.
  • British Columbia3.3%.
  • Manitoba3.3%.
  • Ontario3.1%.
  • Saskatchewan3.1%.
  • Newfoundland and Labrador2.7%.
  • Nova Scotia2.7%.
  • New Brunswick2.7%.
  • Quebec2.4%.

The national inflation rate rose to three per cent last month, its highest since 2011.