You could call inflation the Count Dracula of the economy.

Once thought of as dead and buried, inflation has been thrust back into the limelight as a central national — and global — economic concern in recent months.

Statistics Canada pegged its June consumer price index (CPI) at 3.1 per cent compared to last June. That figure was a tad higher than the three per cent ceiling established by the Bank of Canada and had analysts wondering whether the central bank would boost rates as a way of slowing inflation.

"What we're seeing is outside forces pushing up prices," said James Marple, an economist with TD Economics.

For many years, rising prices were not a big concern among Canadians. These days, however, consumers and businesses pay rapt attention to financial news and detailed indicators, such as the monthly CPI and the level of the world's oil reserves.

Bad old days

For older Canadians, this scene looks achingly familiar.

Back in the 1980s, consumers also listened for the latest inflation figures and worried about every bump in oil prices or each musing from then-central bank governor Gerald Bouey.

That was because Canada's price index at that time was rising faster than the mercury in a thermometer on a hot day.

For 12 years from 1980 to 1991, Canadian prices increased on average by 6.0 per cent a year, more than three time the current average rate of inflation. Thus, a product a consumer would purchase for $100 in 1980 would cost that person $189 in 1991, a jump of 89 per cent.

Prices accelerated even faster during the early '80s, advancing at an annual 12 per cent clip.

By the middle of the 1980s, Ottawa had had enough.

The federal government clamped down on public spending, and the Bank of Canada hiked interest rates. That combination slowed growth as well as inflation and resulted in some difficult economic times for this country.

It is a world to which no one wants to return.

"That can be exceedingly brutal," said Douglas Porter, an economist at BMO Capital Markets Economics.

June report

This time around, oil costs are again a main source of higher prices in Canada.

In its June report, Statistics Canada estimated overall energy prices to be 18 per cent higher than they were this time last year.

Higher gasoline prices were a major underlying factor pushing up prices. Boosted by rising crude costs, the price of a tankful of gas has jumped more than 25 per cent between this June and last.

Hot commodities

Worse still, higher food demand in big population centres, such as India and China, threatens to make spiking commodity costs another pillar underlying rising inflation.

And oil has not been the only commodity in demand worldwide.

Copper prices are close to a two-year high — in the range of $4 a pound. Aluminum is projected at $1.35 a pound in 2009, a decent increase from $1.20 in 2007.

Indeed, according to Scotia Bank's metals and minerals index, a basket of minerals that cost $100 in 1997 now would fetch $349 on global markets.

Even crops, such as wheat and canola, which historically have been plagued by low prices, are suddenly rising in value. In June, food prices were 2.8 per cent higher compared to the same time last year, according to Statistics Canada.

Bank's response

All of these factors have shifted the indicator on the Bank of Canada's inflation-o-meter dangerously close to the three per cent ceiling.

What has economists worried is that central bank governor Mark Carney might decide to clamp down on the economy rather than let prices continue to rise at such a fast clip.

So far, bank watchers figure that a sputtering global economy will keep Carney's finger off the interest rate gun.

"Look for the Bank of Canada to remain sidelined for the rest of 2008, as upward inflation risk balances slower growth," said Michael Gregory and Benjamin Reitzes, economists at BMO Capital Markets, in a recent commentary.

Indeed, in July, Carney talked about the appearance of sluggish demand within Canada and in our export markets. That will lead to fewer sales abroad, which in turn will reduce pressure on prices in Canada.

As well, economists point out that this country's core inflation rate is dropping.

Core inflation is overall inflation minus the most volatile components, such as food and fuel. According to this adjusted measure, Canada appears in relatively decent shape on the inflation front.

For instance, in the June Statistics Canada report, Canada's core rate stood at 1.5 per cent, well within the Bank of Canada's target range.

Also, the bank has already warned Canadians to expect inflation to peak at four per cent in early 2009, Marple said.

All that means the central bank is giving itself leeway to keep interest rates at the current levels even in the face of persistent inflation.

Still, if the CPI accelerates and shows a threat of spiraling out-of-control, Carney might decide to step in and raise rates, said TD's Marple.