The Bank of Canada has a target rate for inflation, which is the rate at which the prices of goods and services are expected to increase over time. The target rate is 2%. However, the latest data shows that the inflation rate, measured by the Consumer Price Index (CPI), was 6.3% in December, which is higher than the target rate. This means that the prices of goods and services are increasing at a faster rate than what the Bank of Canada has set as their target. The main drivers of this high inflation rate are food and fuel costs. Food prices have gone up because of supply chain disruptions and fuel prices have gone up because of global market conditions.

On the other hand, the Canadian economy has added a significant number of jobs in December and the unemployment rate has fallen to 5%. This suggests that the economy is still strong, and it is a positive sign for the future.

Given these numbers, it is likely that the Bank of Canada will raise its policy rate, which is the interest rate at which commercial banks can borrow money from the central bank. This means that it will become more expensive for banks to borrow money from the central bank, and as a result, it could lead to an increase in the interest rate that consumers pay on loans. Most experts predict that the rate will be increased by a quarter of a point to 4.50%.

There is also a positive outlook that inflation will return to the target range of 1-3% by the end of this year, according to an economic think-tank known as The Conference Board of Canada. This outlook is a good indication that the economy is expected to recover and prices will return to a normal level.

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