OTTAWA – The C.D. Howe Institute says inflation may be higher than currently assumed because of Canada’s climbing house prices.
The think-tank says in a new paper that Statistics Canada needs to change the way it measures housing costs that doesn’t take into account today’s unusually low interest rates.
Philippe Bergevin, a senior policy analyst with the institute, says housing should be treated as any other commodity and measured based on actual sale prices of homes.
That would more accurately reflect the strong run-up of real estate prices since the recession.
Bergevin says a truer picture of inflation might make it more difficult for Bank of Canada governor Mark Carney to stick to with low interest rates for such an extended period.
Carney has kept the bank’s trendsetting policy rate unchanged at one per cent for two years, and many are expecting it will remain at the current level until well into 2013.
Statistics Canada has been urged to change the way it measures changes in cost of living for several years, but until now most analysts believed the agency was over-estimating price increases by about half a percentage points a year.