Central banks have been very poor at predicting inflation over the past year. When Carolyn Rogers, the first deputy governor of the Bank of Canada, warned on Wednesday that worse inflation lies ahead, on the same day, Canadian inflation data shocked almost everyone by jumping to levels unseen since 1983, but no one knows if Carolyn is right, especially after the failure to predict the current inflation surge, because the central bank's forecasting record is very poor.

Rogers and the Bank of Canada are by no means the only ones predicting a bleak future, and it may be time to look for signs of a little optimism. The Canadian inflation rate is now 7.7% — its highest point since 1983. If you are not convinced that inflation is permanently out of control and that the price of everything will keep rising forever, you should know that inflation is ultimately temporary and will peak at some point. The question is: when is that point?

On the other hand, the British railway strike and new data showing that Canadians increasingly expect inflation to persist are worrying indicators of what the future might hold. But just this week, there were counter signals that some of the main drivers of inflation — food, oil, and supply chain disruptions — may have started to heal themselves.

Meanwhile, although retail sales have yet to show a strong impact from the higher borrowing costs imposed by the central bank's rate hikes, high Canadian home prices have been affected by the interest rate increases — something Rogers has noted.

To look at the grim perspective first, the strike that halted transportation across Britain is a potential warning about the kind of forces that can push wages, and thus prices, higher.

For his part, Mick Lynch, general secretary of the British Railway, Maritime and Transport Workers union, said this week: "Our campaign will continue as long as we need to work." With demands for a three percent wage increase amid inflation over nine percent, public sector unions, including the health sector, are struggling to recover lost purchasing power for workers.

So far, there is little evidence of the possibility of such a disruptive strike in Canada, and governments have decided to try to appease workers before it gets to that point. For example, federally regulated dairy farmers were granted a price increase mid-year. Milk prices are set to rise by another 2.5% with dairy farmers agreeing to the cost increase.

As Rogers repeated on Wednesday, inflation expectations, convincing workers and companies that prices will keep rising, is one of the things central banks most fear continuing to do.

A recent report from the Conference Board of Canada offers some good and bad news on this front. New data for June shows that Canadian inflation expectations for the next year have "risen," but three-year expectations have declined, indicating that many Canadians may still be in a transitional phase.

While core inflation rose again in the latest Statistics Canada data, there are still some key products whose high prices serve as a benchmark for Canadians' inflation concerns.

Prices at fuel pumps reached new highs last month, but fuel buyers know this month that prices have dropped significantly so far (despite their high price), meaning the possibility of a lower inflation figure next month.

Some encouraging price data this week also came from food commodity analysts at Agritel, who showed that global prices for grains and oilseeds have started to decline, although one reason for the decline is fear of a recession.

While prices remain relatively high, food producers worldwide, including in Canada, are likely to plant more land, which helps drive prices down if the weather cooperates.

Similarly, even as US President Joe Biden promised tax cuts on gas, oil prices began to fall. Despite consumer eagerness to drive in the US and Canada, Clarence Woodsma, author of "Shipping and Local Economic Development" and an associate professor at the University of Waterloo, points out, "If we are in a recession, companies will stop placing orders to increase their material stock until they watch what happens in the next quarter."

This may be truer following recent supply chain difficulties faced by companies in North America. Shortages encouraged companies to fill their warehouses when opportunities arose. With rising recession expectations, they must now try to get rid of those excess stocks, unintentionally helping ease the supply shortage crisis.

Edited by: Dima Abu Khair