Is Inflation Looming for Canada?

All signs point to yes.

"The Bank of Canada is on heightened alert for inflation and a stronger recovery than it had bargained for.

The central bank continues to hold interest rates at historic lows but is signalling to markets that inflation is running slightly higher and the economy, driven by "vigorous domestic spending" and a gradual recovery in exports, is expanding somewhat faster than it had projected, a juggling act for Governor Mark Carney.

Mr. Carney and his fellow policy makers at the Bank of Canada are now under more pressure in terms of how they time the first interest-rate hike after a lengthy run at near zero, economists say, and the next reading of inflation, due March 19, could be crucial to their thinking."

Inflation Set to Rise Faster than Expected

There are many other contributing factors to this impending problem. The virtual moratorium on personal lending over the last year allowed the banks to build up vast capital reserves and report record profits...until the government stepped in (late is better than never) to push for increased lending under the stimulus plan. Now Canada's financial sector has too much money without enough places to put it - and that spells inflation.