economic commentary

March 31, 2024 - Inflation Levels Improve But Remain Elevated

North American inflation has improved significantly from the peak levels reached in 2022, however, levels remain higher than central banks would like to see at this point in the economic cycle. After increasing to 3.4% to end the year in both Canada and the U.S., annual inflation rates for January declined to 2.9% and 3.1%, respectively. U.S. inflation surprised on the upside again in February, with the annual rate moving up to 3.2%. Better progress has been made in Canada, with the annual inflation rate coming in at a better-than-expected 2.8%. Despite the improvements made over the past two years, inflation remains higher than the central bank target of 2%. In addition, the core rate of inflation remains higher than the headline rate, with Canadian core at 3.1% and the U.S. at 3.8%. Further improvements in core readings are required before central banks are confident that inflationary pressures have been contained. Inflation declines in Europe continue to outpace the progress made in North America as Eurozone inflation now stands at 2.6%, after peaking at 10.6%. Inflation in the U.K. is now at 3.4%. Inflation will continue to be the driving force impacting global financial markets and central bank monetary policy throughout the balance of the year.

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