Canadians are worried inflation will stay high for longer: Bank of Canada survey

The Bank of Canada says new surveys show consumers expect inflation to remain high for longer, while businesses largely see pressures easing in the long term.

A pair of new reports from the Bank of Canada point to rising inflation expectations by Canadian businesses and consumers.

In its business outlook survey released Monday, the central bank said businesses’ expectations for near-term inflation have increased, and firms expect inflation to be high for longer than they did in the previous survey.

“Many firms continue to report plans for raising wages to attract and retain workers,” the bank said in its report which suggested businesses expect wages and prices to grow at a faster pace.

“In addition, a growing number of businesses mentioned the rising cost of living as an important source of wage growth. Nearly half of firms anticipate their wage increase will remain above pre-pandemic levels beyond the next 12 months.”

The report also said businesses expect sales growth will begin to slow and return to normal following the rapid recovery from the pandemic.

Labour shortages and supply chain bottlenecks continue to be key issues with supply chain problems taking longer to resolve than previously anticipated, according to the report.

In response, the business outlook survey said businesses are reconfiguring supply chains and holding more inventory than usual as well a majority of firms are planning to invest and hire more.

However, the Bank of Canada said longer-term expectations for inflation by businesses remain stable between two and three per cent.