Inflation exceeded the Bank of Canada’s control range for a sixth straight month, worsened by supply chain bottlenecks that are proving stubbornly persistent.

The consumer price index rose 4.4 per cent in September from a year earlier, Statistics Canada reported Wednesday in Ottawa. That’s the highest reading since February 2003, exceeding consensus expectations of 4.3 per cent in a Bloomberg survey of economists.

On a monthly basis, inflation was up 0.2 per cent in September. Higher food, shelter and transport prices were the main contributors. The average of the central bank’s core measures — often seen as a better gauge of underlying price pressures — ticked up to 2.67 per cent from 2.6 per cent in August.

The hot inflation readings of the last six months are deepening a communications challenge for Governor Tiff Macklem, who maintains the spike in consumer-price gains will be short lived. The data also come as traders in the overnight swaps market bet increasingly against the Bank of Canada’s guidance that policymakers won’t raise interest rates until the second half of next year…read more.

Prime Minister Justin Trudeau’s government is set to impose higher taxes on Canadians, which will help fund some campaign promises but are not broad enough to also start paying down the country’s record levels of debt, leaving Canada vulnerable to the next economic crisis, analysts say.

This could be a risky strategy for the country, which piled on new debt at a faster pace than any of its Group of Seven peers during the pandemic. The high level of indebtedness could limit Canada’s ability to manage long-term challenges that require massive government funding, like transitioning from a fossil fuel-reliant economy to a green one.

A far higher debt-to-GDP ratio post-pandemic means Canada has far less wiggle room to respond to the next crisis, be it economic, trade, climate or health-related, analysts say.

Essentially, Canada’s large debt burden “does not leave significant fiscal space to offset major new shocks,” said Kelli Bissett-Tom, director of Americas sovereign ratings at rating agency Fitch Ratings.

Fitch has already stripped Canada of a triple-A credit rating, but S&P Global Ratings and Moody’s Investors Service still give Canadian debt the highest rating…read more.