The fight to tame inflation has only just begun

Inflation is decelerating quickly. It peaked at 8.1 per cent last summer. It fell to 5.9 per cent in January, and the Bank of Canada predicts it will fall to three per cent by the end of this year.

But economists say that's the easy part.

The Bank of Canada has repeatedly said it's committed to getting price growth all the way down to two per cent. One of the bank's deputy governors delivered a speech in Calgary on Feb. 16 titled No Two Ways About it: Why the Bank is Committed to Getting Back to 2%.

"If inflation stays above target for a significant amount of time, then high and variable inflation will likely go hand in hand with a less efficient, more distorted economy," deputy governor Paul Beaudry said.

But both the forces that shape inflation and the way we think about it have fundamentally changed. After decades of persistently low inflation, most forecasts show price growth is now set to remain stubbornly high.

"Before the pandemic, central banks were really struggling to get inflation up to two per cent," said Bank of Montreal chief economist Douglas Porter. "Now, I think they're really going to struggle to get it down to two per cent."

He said a lot of the forces that were keeping inflation low have "run their course" — pointing primarily to globalization and tech.

"Globalization, at best, has stalled out. I think, at worst, it might even be going into reverse," Porter told CBC News. Technological advances also kept pushing prices lower, but they, too, are likely starting to ebb, he said.

"I wouldn't say it's over, I just don't think it's quite as helpful. You know, for instance ... Amazon's effect on retail prices is probably largely baked in there now."

Economists like Frances Donald agree. She's the global chief economist at Manulife Investment Management. And she's been warning about this for years.

"A lot of the pressures on inflation were actually in process before the pandemic hit," Donald told CBC News.

She said deglobalization has made international trade more expensive, changing climate risks have made food production more volatile and supply chains have become more vulnerable.

"If you run through the list of the structural pressures on inflation ... you'll find that very few of them are sensitive to domestic interest rate policy, especially in Canada," Donald said.

The other major factor in all of this is consumer expectations.