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Inflation may be slowing, but experts say it’s not easing up on pocketbooks

New data from Statistics Canada (StatCan) shows inflation is cooling off, but that doesn’t mean it’s any easier for Canadians.

StatCan reports that inflation rate slowed to 3.1 per cent in October, down from a 3.8-per cent increase in September. However, John McCallum, professor at the Asper School of business, said people won’t feel this in their pockets yet.

“Groceries are still going up,” he said, referring to StatCan’s reported 5.4-per cent increase in grocery prices.

“The reason inflation came down this month had a lot to do with oil prices and with gasoline prices,” McCallum said, StatCan adding this is mostly because of “producers switching to cheaper winter blends.”

McCallum noted service prices are also staying high, which StatCan noted are rising quickly. September saw a 3.9-per cent increase in services, versus October which jumped by 4.6 per cent.

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Rent and property taxes also continue to climb.

McCallum said federal spending has prolonged this issue for everyday Canadians.

“We’re spending a whole lot more on interest than we used to, and that’s money you can’t spend fixing health care, providing social services, improving education and so on.”

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There are a couple of policies available to help ease inflation down, McCallum said. The first is a monetary policy, where “you push interest rates up to discourage people from spending. As they spend less, that takes pressure off prices because there’s not as much demand.”

The second is controlling federal and provincial government spending. “They are a major contributor to prices going up,” McCallum said.

Credit counsellor Sandra Fry says she’s seen a lot more people coming through her doors seeking help, and “five times the number (of) seniors as when I first started.” She mentioned seniors’ fixed income — be it pension, savings, or a combination — is difficult to make do with.

But “everyone’s feeling the pinch,” Fry said. “They’re still struggling to make ends meet. Still shocked at the grocery checkout. Still wondering how they’re going to pay for Christmas.”

McCallum said the Bank of Canada probably won’t be dropping interest rates anytime soon.

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“They do not want to prematurely declare victory, start to lower interest rates, and see us go back to square one or square two again because it’s been so painful.”

He said more than a trillion dollars in mortgages will have their rates reset over the next two years.

That’s causing a lot of stress for Fry’s clients, she said.

“I have counselled a few people this year that were shocked with how much their mortgage — when it renewed — what it jumped up to as far as payment amounts are concerned.”

She said with the increased need for financial accessibility, credit cards can look like a glowing option –but, she warns, they can be a trap.

“Credit cards cause problems because the interest keeps accruing every single month. If they’re (just) making the minimum payments, often (they’re) not keeping up, or (they’re) literally stuck on the debt treadmill. They’re just paying it, servicing it every month, and they’re not getting ahead.”

It all comes back to keeping a budget and knowing where your money is going, Fry said, adding priorities for budgeting should include groceries, housing, food and transportation. “Everything else is something that people can look for areas to cut back on.”

The only other option if there’s no room to cut back, or if homeowners don’t want to reamortize or refinance, “is going to be (increasing) your income. So, look for other ways to diversify your income stream,” she said.

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If you need help getting creative to make your paycheck stretch, Fry said to reach out to Credit Counselling Society at 1-888-527-8999 or go online for various resources.

— with files from Global’s Katherine Dornian

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More Canadians struggling to make mortgage payments

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