Inflation measures changes in the overall price level. Inflation tends to rise in periods of strong economic performance and decline when the economy is weak. Low and stable inflation provides a reliable and consistent basis for businesses and individuals to make borrowing decisions. The Bank of Canada’s current inflation target is 2%, as measured by the Consumer Price Index.
Inflation in British Columbia tends to be stable, hovering between one to two percent. This is consistent with the Bank of Canada’s inflation targets. Canada, BC, and Victoria’s inflation rate between December 2014 and December 2015 was 1.1% while Vancouver’s inflation rate was at 1.2%. Inflation rates specific to Nanaimo are not available, but those for Victoria provide an indication of the relationship between price levels on Vancouver Island and other parts of the province. Inflation rates on Vancouver Island are similar to those in BC and tend to be slightly below those in Vancouver.
Exchange rates are determined by supply and demand. A strong Canadian dollar indicates that foreigners are purchasing goods and services from Canada. As the same time a strong CAD means that Canadian exports are relatively more expensive which will have a negative impact on industries producing goods for export.
The CAD dollar depreciated relative to the USD in 2015 due mainly to a trade deficit resulting from crude oil prices dropping significantly. The lower CAD is leading to a boost in the Tourism sector. Canadians are taking vacations closer to home and US travel has picked up as a result of US dollar appreciating.