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MNI:BOC Says Firms Have Record Views Of Wage & Price Gains

Results come before Jan. 26 decision on record low policy interest rate.

Source: Bank of Canada
MNI (Ottawa)

The Bank of Canada reported Monday that companies had record high views on elevated wage and price inflation just before the omicron variant struck late last year, results that may add to the case for raising interest rates.

The quarterly Business Outlook Survey of about 100 firms taken Nov. 15 to Dec. 6 showed a record 67% of firms said inflation will exceed 3% over the next two years. That's beyond the central bank's 1%-3% target band for price gains. On wages, 80% of firms expected faster pay increases over the next 12 months.

"Businesses noted several factors driving higher inflation, including: supply chain disruptions; prices for gasoline, other energy products and food staples; the impact of expansionary monetary and fiscal policies," the report said. "That said, in response to a special question, most firms said they expect currently elevated inflationary pressures to dissipate over time, with inflation returning close to target in one to three years."

"The outlook for firms that fared well through the COVID‑19 pandemic remains robust," the report said, citing record balances of opinion on hiring and investment. "Firms are uncertain about when these supply chain issues will be resolved. But many expect that it will take more than a year for supply chains to return to normal." One weak spot was the balance of opinion on future sales growth dropped for a third quarter, to 3 from priors of 9 and 47.

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |

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