The Bank of Canada expects inflation to “slightly exceed” 8% as early as next week when June data is released and stay in that range for a few more months, Gov. Tiff Macklem told a group business in an Internet transmission transcript. released Friday afternoon.
Macklem, who spoke with the Canadian Federation of Independent Businesses the day after Wednesday’s 100-point rise in interest rates, also urged small business owners to avoid incorporating the current rate of increase in prices on their contracts.
“Inflation is seven high. It will probably go a little over eight (8 percent). Next week we have the next CPI. We know oil prices were very high in June, so I wouldn’t be surprised to see it go up, ”Macklem said.
Canadian inflation was 7.7% in May, the highest since January 1983. Analysts polled by Reuters expect June inflation to reach 8.3%, which would be the highest since 1982. data will be released on Wednesday at 8:30 am ET (1230 GMT).
Macklem reiterated that the Bank of Canada now expects inflation to average around 8% over the next few months, and then fall by around 3% by the end of 2023 and to the 2% target by 2024.
Canadian Deputy Prime Minister Chrystia Freeland, who also serves as finance minister, said Saturday that the federal government responded by “not pouring fuel into the flames” through its budget and addressing some of the drivers of inflation as well as policies. labor and housing. .
“We are confident that the Bank of Canada has the tools and experience to do this job,” he told reporters in a telephone briefing, noting the bank’s independent role.
Macklem also made it clear that the bank is very concerned about a wage-price spiral, where companies raise wages to keep workers and then pass on higher costs to households, which then want higher wages to offset inflation.
“You can see that this creates a cycle of self-perpetuation,” he said, adding that the central bank will take the necessary actions to return inflation to the target.
“So as a company, you don’t plan to keep the current rate of inflation. Don’t include it in long-term contracts. Don’t incorporate that into wage contracts. It will take time, but you can be sure that inflation will go down.”
The CFIB said it could not publish its scheduled recording of Thursday’s webcast due to a technical glitch. The business group released its transcript Friday afternoon.