OTTAWA, (Reuters) – Prices are increasing in Canada at the fastest pace for 31 years. However, this is not feeding into a wage spiral. Canada’s budgetary watchdog stated Tuesday that inflation will return to its target level in the coming years.

Canadian businesses and consumers expect inflation to rise in the near term but their long-term outlook remains anchored.

“Financial markets participants generally do not view the current high-inflation climate as permanent,” he stated. The wage settlements data show no indication that higher inflation is expected to be reflected in wages negotiations in unionized sectors.

Canada’s inflation reached 6.8% in April. This is the highest since January 1991. Food prices have been rising at a rapid pace since 1980s. The world has seen price rises due to Russia’s invasion in Ukraine.

The policymakers should worry about the wage spiral. It is where workers are forced to pay more for their living, causing businesses to increase prices to make up the difference.

Canada’s wage growth is still slowing. According to data from the government, average hourly earnings in April rose by 3.4%. This is well below inflation.

PBO discovered that wages increased 8.6% in the period since the outbreak of the pandemic. However, inflation was slightly lower at 9.0%.

Ottawa leaders of the Conservatives and New Democrats called upon Justin Trudeau’s Liberal government, to implement measures to lower the inflation impact.

Official opposition Conservatives call for temporary gas tax holidays and an end of fertilizer tariffs. The New Democrats, however, propose higher corporate profits taxes.