Bank of Canada: Consumers and Businesses Expect More Inflation

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Bank of Canada: Consumers and businesses expect more inflation

The Bank of Canada has just released two reports on the outlook for businesses and consumers.

Businesses and consumers in Canada expect to see inflation continue to rise, reveal two reports from the Bank of Canada.

The bank's Canadian survey of consumer expectations suggests that consumers expect higher inflation, and their worries mostly revolve around food prices, gas prices and rents.

The consumer report also highlighted that rising expectations for inflation and interest rates were hurting consumer confidence.

The bank said noted that lower-income Canadians and seniors were more concerned about grocery prices and rents than younger respondents and higher-income households.

Consumers, especially those on low incomes, are adapting to high inflation by cutting back on spending, postponing big purchases, looking for discounts and options for cheaper solutions, the bank explained.

Some mentioned that they are sticking to a strict grocery budget and buying more house brands, or that they have stopped shopping. #x27;buy things deemed less essential. Others rely more on crops from their vegetable garden or more economical modes of transportation, such as bicycles, the report said.

The report also revealed that most respondents believe the Bank of Canada has the credibility and tools to control inflation, and that their belief in the bank's ability to meet its inflation target has not changed much since before the pandemic.

Statistics Canada reported last month that annual inflation stood at 7.7% in May, its highest level since 1983.

The Bank of Canada raised its key interest rate target in an effort to bring inflation back to its target of 2%.

Meanwhile, the central bank's business outlook survey showed that companies' expectations for near-term inflation had risen and companies also expected inflation is higher for longer than in the previous survey.

Many companies still plan to raise wages to attract and retain workers, the bank said central in its report, suggesting that companies expect wages and prices to rise at a faster pace.

In addition, a growing number of respondents identified the rising cost of living as an important reason for salary increases. Nearly half of companies expect their wage increases to remain above their pre-pandemic levels for more than a year.

The report also indicates that companies expect that sales growth will begin to slow and return to normal following the rapid recovery from the pandemic.

Labor shortages and supply chain bottlenecks continue to be key issues, with supply chain issues taking longer to recover than expected, according to the report.

In response to this backdrop, the Business Outlook Survey indicates that companies are reconfiguring their supply chains; supply and hold more merchandise in reserve than usual, and that a majority of companies plan to invest and hire more.

However, the Bank of Canada pointed out that longer-term expectations for inflation by businesses remained stable, between 2 and 3%.

La central bank has raised its rates three times since the start of the year, bringing its key rate to 1.5%. Its next interest rate decision is set for July 13, and many private sector economists expect it to raise its policy rate by three-quarters of a percentage point.

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