Inflation expectations hit record in Bank of Canada surveys
BNN Bloomberg
Canadian business and consumer expectations of inflation over the next couple of years is at a record, according to the country’s central bank, a worrying development that will stoke bets of more aggressive rate hikes.
The Bank of Canada’s quarterly surveys of executives and consumers released on Monday show the price pressures that have brought inflation to four-decade highs are expected to persist for longer than previously thought, as the country faces tight labor markets and companies get hit by rising input costs.
The reports -- which also show continued evidence that businesses are facing unprecedented challenges meeting demand -- illustrate the urgency for Governor Tiff Macklem to quickly withdraw stimulus from an overheating economy amid concerns that inflation is becoming entrenched.
Markets are almost fully pricing in a 75 basis hike at the central bank’s July 13 decision, bringing the policy rate to 2.25 per cent. The bank is expected to raise it to as much as 3.5 per cent by the end of this year. The benchmark was as low as 0.25 per cent in March.
