Canada money finance growth chart graph
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Don’t expect inflation to stay above 4.5% throughout 2022, but don’t count on it falling below 2% any time soon, economists with the big banks suggest.

“If you were to pin me to the wall, I would suggest we are looking at inflation of between 2.5% and 3% by the end of this year. It’s almost 5% right now,” said Douglas Porter, managing director and chief economist with BMO Financial Group.

“We think inflation will remain high, probably early into the second quarter [of 2022] and then start to dissipate as we go through the course of the year,” said Dawn Desjardins, vice-president and deputy chief economist with RBC. “But having said that, we still think inflation [will remain] above where it was prior to the pandemic.”

Desjardins and Porter were among the panelists at Economic Outlook 2022, a virtual event hosted Jan. 5 by the Economic Club of Canada.

Also on the panel was Avery Shenfeld, managing director and chief economist with CIBC Capital Markets.

“One thing that could help us, on the inflation front, is if we can get consumers to spend a little less on Amazon packages — and things that have to be shipped from China — and more on restaurant meals, hotel rooms, movie theatres and live entertainment. Those are all sectors that still have a lot of excess capacity,” Shenfeld said. If consumers buy fewer material goods “and do more outside their houses — which I think we are still hoping [for] when omicron fades,” he added, they will both drive economic growth and help cool inflation.

In Canada, the consumer price index rose by 4.7% from November 2020 through November 2021. The main drivers were the year-over-year increases in the prices of gasoline (43.6%), furniture (8.7%) and food (4.4%).

In 2022, “we could actually get a strong year for consumer spending but a shift in the composition in that spending could actually be helpful to us on the inflation front,” Shenfeld said.

One key driver of inflation last year was an OPEC agreement, in early 2021, to clamp down on oil production, Porter suggested. But he doesn’t expect a similar dynamic this year.

“We don’t believe that oil prices are going to double again,” Porter said. “We don’t think used car prices in the U.S. will rise by 30% to 40% again. They could even fall by 30% to 40% over the next year, but there are still clearly some lingering upside [inflationary] pressures,” such as wages in a tightening labour market.

On Jan. 5, West Texas Intermediate closed at nearly US$78.