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Inflation continues to cool, but relief's not yet in the forecast

The inflation rate continued to cool in August, according to new data from Statistics Canada, but still sits well above the Bank of Canada's two per cent target.

The national inflation rate fell to seven per cent, year over year, in August. Alberta fared better overall, dropping to six per cent.

"Until it's fixed, there will be more pain. Are we on the right path? Absolutely," said Anupam Das, professor of economics at Mount Royal University.

Nationally, food prices remained high, at 10.8 per cent over the previous year in August.

Alberta again beat that number, coming in at 9.4 per cent, but a Calgary restaurant owner and industry advocate says that number doesn't accurately represent the challenges faced by the food service industry.

"Food is 9.4, but we have to look at some certain categories of food," said Ernie Tsu, owner of Trolley 5 on 17 Avenue S.W.

"Dairy is up by 20 per cent, beef is up by 16 per cent to 20 per cent, depending on which cuts, cooking oil is up by 20 to 24 per cent."

Tsu says different restaurants are handling price pressures differently, some increasing prices, others changing their menus to reduce high-cost staples.

"Those are big-hitters for restaurants," Tsu said.

There is some hope for food prices to start to settle out.

Simon Somogyi, who studies the food business and teaches at the University of Guelph, says grain prices have eased somewhat, but it takes time for the effect to work its way through the system.

He also says the Russian invasion of Ukraine has created pressure on fertilizer, grain and fuel.

"That impacts the supply and price of fruits and vegetables as well," Somogyi said.

But with autumn in the air through much of Canada, some of the solution to food prices is coming from close to home.

"The Canadian season is starting to come more online, particularly as we head into September. So I see fruit and vegetable prices dropping a little bit over the coming month,” Somogyi said.

The Bank of Canada has continued to raise base interest rates over the year and has two more scheduled rate announcements before 2022 is done.

Further increases are likely.

"We are not anywhere close to three or four per cent inflation. It's still very high. There is some good news from this report, but it's still very high. So central bank will still increase the interest rate to curb the inflation," Das said.

Those increases are going to hit especially hard for people holding variable-rate mortgages or lower-equity fixed mortgages that are up for renewal.

Consumer debt is another weak point ripe for a hard hit.

"It's definitely going to make it unmanageable for some households," said Rob Roach, deputy chief economist for ATB Financial.

"And the higher they go, the more households will find themselves in that predicament." Top Stories

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