grain and fertilizer. weather events in other parts of the world affected the supply of many crops. and disease restricted the supply of poultry and eggs. this perfect storm of factors was showing up in canadian grocery stores by the middle of last year. - 3the other main driver of high inflation around the world has been a combination of disruptions in global supply chains and a spike in demand for durable goods. like other people around the world, many canadians upgraded their homes during the pandemic with things like new furniture, appliances and technology. we couldn ’ t spend on services — like vacations and restaurants — so most of our spending, and the spending of many others around the world, was going to goods. meanwhile, lockdowns were wreaking havoc on highly integrated global supply chains. factories were shut down, raw materials were in short supply, and transportation backlogs piled up. the result was prices for a wide range of goods spiked. domestic demand these three global inflationary forces — a spike in commodity prices, a surge in global demand for goods and impaired supply chains — then ran into a fourth element : an overheating economy here in canada. early last year, around this time, we were coming out of the omicron wave of covid - 19 and what may turn out to be the final lockdown. the canadian economy had become increasingly resilient over the course of the pandemic, weathering each subsequent lockdown better than the last. canadians were anxious to catch up on the things they had missed, like travelling and eating out, so we saw some spending start to shift from goods back to services. and even though canadian businesses had shown remarkable resilience adapting to multiple lockdowns, many struggled to keep up with the surge in demand they faced. supply chain issues were still with us, and staff who had left or been laid off during the pandemic had to be rehired, re - trained or replaced. our survey of businesses in the first quarter of last year found that four out of five would have trouble meeting an unexpected boost in demand — a record high. 1 this pressure showed up very clearly in the labour market. the number of vacant jobs rose to nearly twice the pre - pandemic level, an obvious sign of widespread labour shortages. labour is an important input cost for businesses, particularly in the services sector. this shortage of available workers, combined with the surge in demand for services, put upward pressure

solve inflation if it is primarily a global phenomenon. since it was big global forces — surging commodity prices and major supply chain disruptions — that helped spark inflation in the first place, what can the bank really do about it? these are good questions, and i am going to do my best to answer them today. i ’ ll explain how high inflation in canada largely took root due to global factors that pushed up prices for many commodities and other goods. then i ’ ll talk about how inflationary pressures spread in canada because of strong domestic demand, in other words, an overheating economy. this is what we ’ ve been addressing with higher interest rates. after that, i ’ ll go over what we ’ re seeing globally and at home to put things into a broader perspective. finally, as i mentioned, i ’ ll talk about what led us to our decision yesterday. how high inflation took hold in canada global forces without question, one of the biggest drivers of high inflation around the world has been higher commodity prices. when the covid - 19 pandemic struck and the global economy abruptly shut down, many commodity prices plummeted — especially oil prices, but prices for natural gas, lumber and copper also fell. however, some sectors of the economy, such as housing, recovered quickly. so demand for some related commodities, such as lumber, bounced back very fast. and then, as things started to open back up, demand and prices for other commodities, such as oil and natural gas, recovered quickly too. then, in early 2022, russia ’ s invasion of ukraine further upended the global economy. the ukrainian diaspora in canada is the world ’ s second largest, and manitoba has the highest concentration of ukrainian - canadians in the country. so i know the human toll of this senseless war has been felt here. the economic impacts have also been far - reaching and damaging. by the middle of last year, global commodity prices — particularly for oil, natural gas and wheat — had surged to levels not seen since 2008, right before the global financial crisis. it didn ’ t take long for canadians to feel the effects. gasoline prices soared to well above $ 2 a litre last summer. and because commodities are key inputs to so many products, the impact on prices was broad - based. higher energy prices raised the operating costs of virtually all businesses. they also raised the cost of shipping goods to customers. food prices soared too. the war in ukraine affected the prices of