YOY inflation rates will, of course, begin to drop at some point, especially if energy costs do not get appreciably higher. However, energy costs have not yet percolated through all goods and services yet, so the prices of goods and services do not yet fully reflect underlying higher energy costs. The bigger issue will remain wage demands going forward. Once a new 3 year union contract is signed for 5% increases in each of the 3 forward years, these costs will be passed through to customers. That is the key fear of "high inflation expectations" I mentioned in an earlier post on the latest BoC surveys. So yes, we should expect YOY rates to start to decrease but mostly due to purely mathematical reasons.There is also the possibility that inflation comes down over the coming months, perhaps quicker than envisioned by those straight lining past trends. Personally I am open to all possibilities, including this one. Making the case: Commodity prices over the past 6 weeks have fallen significantly. Most notable is the recent move in oil. However, preceding this move were other commodities and metals (copper, grains, aluminum, etc) that dropped 20% or more in a matter of weeks. Target, Walmart and other US retailers have warned of excess inventory that will not clear until Q4. Micron last week warned of a drop in demand for memory and is forecasting unit declines in PCs, smartphones this year. Some of this is a shift to services from goods. We will see.