Kevin Carmichael: Results suggest that the central bank has entered a difficult phase
Every quarter, the central bank polls a representative group of companies to give it a sense of the mood inside the country’s C-suites. It was no surprise thatturned up anxiety over prices, which have risen to the highest in more than three decades, according to Statistic Canada’s consumer price index.
Some 35 per cent of respondents said they expected inflation to remain “substantially” above the Bank of Canada’s target of two per cent for two to three years, compared with about 31 per cent in the four quarter; 34 per cent said inflation would drop to something closer to the target within one to two years, compared with about 39 per cent in the previous survey.
The Bank of Canada opted to put a positive spin on the results. “Less than one-fifth of businesses expect inflation to stay well above the bank’s target,” the report said. “That is, most firms anticipate inflation will be high in the short to medium term but then decline.”Article content Policy-makers’ greatest fear is that the public loses its faith in their ability to bring inflation under control. That faith is being tested, as more than two-thirds of respondents said they expect inflation will be above three per cent — the high end of the Bank of Canada’s comfort zone — for the next two years. Those findings support the central bank’s pivot to a more aggressive path to higher interest rates, starting with a half-point lift next week.
“Businesses generally see inflation’s return to target as the result of expected interest rate actions by the bank and improvements in supply chains as the impacts of the pandemic fade,” the report said.
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