On food inflation, the federal ‘grocery rebate’ is not the solution, but the problem
Over the past few years, since the start of the COVID-19 pandemic, many governments, including Canada’s, have spent significant amounts to provide socio-economic safety nets for people in need. Companies have also received funding to cope with economic uncertainties.
When a government injects more money into the economy, the excess liquidity can drive up demand for goods, including food, which, in turn, can lead to higher prices. Furthermore, when people have more disposable income owing to government expenditure, they tend to spend more on a variety of goods. That is especially so when the factor on which everyone blamed high grocery prices has waned – yet prices remain stubbornly high.by Russia pushed agricultural commodity prices to astronomical levels. One year later, prices for some of those commodities have dropped by nearly 50 per cent. But our research group, along with others, concluded many years ago that the correlation between commodity prices and retail prices is, for the most part, weak.
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