Taming Inflation: How Governments, Companies and Consumers Can Help

Ottawa, April 6 — Inflation has been the major story in Canada and globally for the past year, and according to new research from Signal49 Research, government, businesses and consumers can all play a role in slowing its impact. Month-to-month inflation in Canada has slowed to roughly 3 per cent on an annualized basis, and Signal49 Research expects inflation to continue slowing in 2023.  

“Many of the factors driving inflation were global and stemmed from the pandemic,” according to Michael Burt, Vice President at Signal49 Research. “While the Bank of Canada acted aggressively to contain inflation by increasing interest rates, their role now shifts to ensuring Canadians understand why the moves were necessary. By doing so, they can prevent pushback on any further interest rate increases and the assumption that inflation will be permanently higher.”

According to Signal49 Research, governments have a multitude of tools available to help quell inflation. They can raise taxes and reduce spending during good times and do the opposite during bad times. If governments do not coordinate their actions with their central banks, however, they risk offsetting the intended effects of changes in monetary policy.

Businesses similarly have a role to play in slowing inflation. According to Signal49 Research, many of the initial contributors to a spike in inflation are now easing, including commodity prices and shipping costs. Typically quick to pass on higher costs to consumers, there is less evidence of price cuts from businesses despite recent price corrections.

The other key thing that Canadian businesses can do, particularly given their healthy profit situation, is invest more in machinery and equipment, software, intellectual property, and research and development. Limited business investment, and the associated poor productivity growth, has been a long-standing challenge in Canada.

Consumers can also play a role, according to Signal49 Research, by voting with their wallet, meaning being conscious of what is being purchased and where. This is easier to do with some expenditures than others, but being more deliberate in your purchase decisions can reap significant savings.