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"We are trying to balance the risks of over and under-tightening monetary policy," Macklem said in his end-of-year speech delivered in December. . Energy prices soared throughout the year, as Russia's invasion of Ukraine led to high commodity prices. Hotel and airline prices skyrocketed as many Canadians jumped at the chance to travel for the first time since the COVID-19 pandemic hit. While the supply chain issues that wreaked havoc through the pandemic largely subsided, there were still challenges that cropped up throughout the year.
"Inflation forecasts were nowhere near high enough in 2022, and there's no reason to believe they'll be materially better in 2023. There's more risk of a high-side surprise ," BMO Capital Markets macro strategist Benjamin Reitzes said in a 2023 preview note. "These changes will increase resilience but at the cost of efficiency. And through this adjustment, production costs could rise, increasing price pressures."