Inflation fallout: Albertans should brace for impending price hikes coming at breakneck speed

Nationwide inflation hit a 30-year high at the end of 2021.  Economists are warning that the speed of price increases could increase, with many predicting an interest rate hike from the central bank the end of January.

Financial educator Mark Kalinowski of the non-profit Credit Counselling Society sees firsthand the effect inflation us having on his clients

"People's incomes don't keep up with the rising cost of goods. So, especially when we're talking about middle class or lower middle income Canadians, they struggled to maintain their lifestyle, as the things that they need cost more and more.

"Gas is more expensive, the cost of groceries is through the roof, and they struggle to start balancing out those things they need, and still have some of those things they want."

He says while interest rate hikes, like the one expected this month, tend to put downward pressure on inflation, they do not ease the cash crunch for many Canadians

"People will struggle definitely as interest rates rise, and we're going to see Canadians have to seek alternative solutions to just try to make those minimum payments on their credit card," said Kalinowski. "They're not going to get anywhere. It's going to cost more to pay the mortgage on your house. If you're buying a new car, chances are you're not going to get that zero per cent interest rate anymore, maybe you're going to pay a one per cent interest rate. But, again, that's money out of your pockets."

Statistics Canada reported Wednesday that inflation climbed to 4.8 per cent in December, a rate that hasn't been seen in Canada since September 1991.

While it seems like everything costs more some items jumped considerably.

The price for groceries climbed year-over-year by 5.7 per cent; the largest jump in a decade.  Housing costs rose by 9.3 per cent compared to a year earlier. It's even become more expensive to put furniture in that home. Anyone in the market for a new appliance will have noticed the price for those items has risen by 8.9 per cent. That marks the biggest jump in those costs since June 1982.

And of course who hasn't noticed the spike in the price of gas? Even if you don't drive you’ve seen the numbers climbing on the signs. Gasoline prices leapt 33.3 per cent year-over-year from December 2020 to 2021.

According to Statistics Canada, even stripping out the volatile gasoline prices, the consumer price index climbed by four per cent during 2021.

The year-over-year change in prices in December outpaced gains in wages over the same stretch. Statistics Canada said wages rose 2.6 per cent between December 2021 and last month, resulting in a drop in the purchasing power of Canadians.

ATB deputy chief economist Rob Roach says he expects prices to keep climbing into, at least, much later this year.

"Our expectation is that is going to stay high well into 2022 for the next few months, at least. It's going to take some time for those supply chain disruptions we've been hearing about, and the price of oil looks like it's going to stay high. So you put those two things together, there's not a lot of reasons for inflation to come down," said Roach.

"We're probably stuck with these price increases for the next few months, at least. We do expect the Bank of Canada and other central banks around the world to raise interest rates, which should start to help bring down the inflation. But that's also going to take time to work its way through the system."

Roach expects it will be into the second half of 2022 before inflation starts to recede.  Even then he warns prices will only stop rising quickly, and consumers shouldn't expect them to drop.

"It's still going to stretch a lot of Albertans, their budgets, quite dramatically with the price increases and with rising interest rates. But at least we're not back to the '70s, for example, (where) we had rates of inflation much, much higher than where we're experiencing and created all kinds of problems."