Quarterly household survey also showed 5.1% inflation over the next year.
Bank of Canada surveys of companies and households show record views of wage and price inflation amid capacity constraints and disruption from Russia's invasion of Ukraine, the BOC said in a key release ahead of its Apr. 13 meeting at which it is expected to raise its policy rate by as much as 50 basis points.
The BOC’s quarterly business survey showed a record 70% 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, though the report said most firms see inflation slowing beyond two years. Firms expect an average wage increase of 5.2% over the next year, the highest since at least 2006, the survey showed.
"Reports of labour-related capacity constraints and supply chain challenges remain widespread," the business survey said. "Given these pressures and robust demand, businesses anticipate stronger price growth-- and they expect the Russian invasion of Ukraine to add more cost pressures." The business survey results are based on a special survey of 152 firms done after the Russian invasion of Ukraine and interviews Bank officials did beforehand.
The BOC's separate survey of consumers show one-year ahead inflation expectations of 5.1% and two-year views at 4.6%. Consumers also see home prices rising 7.1% over the next year.
Former Governor David Dodge has told MNI the BOC and Fed must hike rates to neutral in a hurry as rapid inflation puts public confidence at risk. The BOC on March 2 raised its overnight rate to 0.5% from a record low 0.25% to start on a "path" of tightening, and some economists see a half-point hike at the Apr. 13 decision and a shift to quantitative tightening.
Source: Bank of Canada