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Economic Viewpoint

The Sharp Increase in Wages May Contribute to Greater Inflation in Canada

August 8, 2018
François Dupuis, Vice-President and Chief Economist • Benoit P. Durocher, Senior Economist

Wages in Canada have risen faster in recent months. This adjustment is largely the result of labour shortages in some sectors and regions against a backdrop of a fairly high demand for workers. However, a rapid increase in wages does not reflect significant gains in worker productivity. This has fuelled fears that the quickened pace of wage hikes will eventually lead to higher upside pressure on inflation. The BankofCanada (BoC) will have to monitor this situation closely and adjust the pace of its monetary tightening as a result.