“The Bank of Canada is in a really tricky position,” Freestone said. “They obviously want to target the prosperity of all Canadians, but it’s very difficult to do that with monetary policy, because (they have) one tool.”
Who’s been the most impacted by inflation?
Economists widely acknowledge that low-income earners are the ones who suffer the most when the cost of living rises. But Freestone’s analysis shows middle-income earners have felt the bite as well.
In 2023, workers in the 40th to 60th percentile of the income distribution allocated the greatest share of their take-home pay to essentials since 1999.
Christopher Ragan, an associate professor of economics at McGill University, says it’s not surprising that Conservative Leader Pierre Poilievre’s more pessimistic message about the economy has resonated with Canadians over the optimism the Liberals have been trying to project.
“People are still thinking about the pain that they felt unexpectedly two years ago, and some of that pain is still there on interest rates,” Ragan said.
“So the government focuses on the reduction in inflation, but they don’t talk about prices still being high. They focus on the reduction in interest rates, but they don’t talk about the people that were hurt by the interest rate increase.”
Do Canadians ever feel good about the economy?
Stephen Gordon, an economics professor at Laval University, says people tend to have negative impressions of economic conditions even when things are going well.
From his perspective, the Canadian economy “dodged a bullet” by coming out of a period of high inflation without experiencing a major economic downturn from interest rate hikes. He noted people’s earnings have risen, including median earnings.
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