Over the past two years, Canadians have felt the sting of rising interest rates and high inflation. The Bank of Canada’s short-term policy interest rate jumped from essentially zero in 2021 to 5% by mid-2023, pushing up market-determined interest rates such as those for mortgages. Meanwhile, inflation climbed from less than 2% in 2020 to an annual average of 6.8% by 2022, well above the Bank of Canada’s target. The inflation surge caught many policymakers and forecasters by surprise.

The sudden return of high inflation and escalating borrowing costs delivered a hard blow to many Canadian households and businesses.

The good news is that inflation has come down significantly in the last year and is now within sight of the Bank of Canada’s 2% goal. In January 2024, the year-over-year increase in the Consumer Price Index (CPI) was 2.9%,........

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