Time to fix the inflation indicator
Many young Canadians have been shut out of home ownership partly because Statistics Canada failed to sound the alarm as prices began to soar. Its Consumer Price Index (CPI) shapes how we understand inflation and guides the Bank of Canada’s rate decisions. When the CPI reads low, the bank keeps rates low, making it easier to borrow more and pay more for home.
Instead of tracking rising home prices, Statscan monitors what existing owners spend on upkeep and mortgage interest. That downplays the real burden for first-time buyers: the purchase price and size of the loan needed to enter the market. The result has been years of cheaper credit that helped inflate home values faster than wages, leaving younger Canadians paying the price.
The CPI’s design isn’t accidental. Statscan explicitly aims “to produce a CPI that is relatively stable,” balancing two objectives: indexing benefits and tax brackets on the one hand and guiding monetary policy on the other. Stability may make sense for indexing Old Age Security or tax thresholds, where sudden jumps would cause disruption.
Full Read: The Globe and Mail