Canada may need a recession to cool down inflation - SABC News - Breaking news, special reports, world, business, sport coverage of all South African current events. Africa's news leader.

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The underlying pressures driving inflation in Canada are likely to peak in the fourth quarter of this year, economists told Reuters, though most see signs fast rising prices are becoming entrenched and warn a recession may be needed to avoid a spiral.

Canada’s inflation data for August will be released on Tuesday, with analysts forecasting the headline rate will edge down to 7.3%, from 7.6% in July and a four-decade high of 8.1% in June.

“Rapidly cooling growth, the pullback in housing prices, and less pressure on supply chains will help cap core inflation relatively soon,” said Doug Porter, chief economist at BMO Capital Markets.The broadening of price increases, increased wage settlements, as well as rising consumer and business inflation expectations are signs that inflation is becoming more entrenched in the economy, economists told Reuters. Six of eight said they see signs of entrenchment.

Still, economists don’t expect any shift to a wage-price spiral to be permanent, particularly if the economy slows down.

 

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