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Bank of Montreal
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Close 2021-05-19 C$ 122.00
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Globe says BMO wonders if inflation spike is a worry

2021-05-20 08:04 ET - In the News

The Globe and Mail reports in its Thursday edition that new numbers Wednesday show the highest inflation rate in nearly a decade -- 3.4 per cent. The Globe's David Parkinson writes that while economists had expected a spike in inflation in April, this was more than most had expected. The questions are whether this is the inflation for which bond markets began bracing months ago and whether we now seeing the consequences of massive debt-financed government spending and highly expansive monetary policies. Mr. Parkinson says that the April consumer price index report, despite its shock value, is not the smoking gun for any of this. It is a single month of data, reflecting a highly abnormal and severely depressed period a year ago, and an unusual yet surprisingly strong recovery that is taking hold. On the other hand, it also cannot be readily dismissed. Because the inflation rate is determined by comparing prices now with those 12 months ago, we are now measuring CPI against the early weeks of the COVID pandemic, when prices for many key consumer goods and services plunged. "Whether this is temporary or not depends on how supply and policy respond in coming quarters," BMO chief economist Doug Porter said in a statement.

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