Inflation set to top 8%, Bank of Canada warns

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Inflation expected to top 8%, warns Bank of Canada

Inflation hit 7.7% in May, a summit since 1983.

Bank of Canada Governor Tiff Macklem believes that the annual inflation could reach 8% in June in Canada and that it will remain at this level for a few months before coming down slowly (Archives).

Inflation in the country could reach and exceed 8% as early as next week, when the data for the month of June is released. And it's likely to stay that high for a few months, Bank of Canada Governor Tiff Macklem told a group of business representatives on Thursday.

According to Mr. Macklem, inflation is likely to go a little above 8%. We will have the next CPI [the consumer price index] next week. We know the price of oil was very high in June, so I wouldn't be surprised to see [the CPI] go up.

In Canada, last May, the inflation was the highest since January 1983. According to some analysts, annual inflation could reach as high as 8.3% in June, which would be the highest since 1982.

The Bank of Canada forecasts that annual inflation will average around 8% over the next few months but decline to almost 3% by the end of 2023. It should then stabilize at around 2 % – its target – in the year 2024.

The governor of the Bank of Canada expressed concern about the spiral of rising prices and wages. In the context of the labor shortage, companies are increasing wages in order to retain their employees. However, this often results in higher prices for consumers, who in turn want higher wages to offset inflation.

This can be seen to create a cycle, Macklem noted, adding that the Bank of Canada will take the necessary steps to bring inflation back to its target of around 2%.

“As businesses, do not expect inflation to continue at its current rate. Don't factor it into your long-term contracts. Do not include it in your employment contracts. It will take some time, but you can be sure that inflation will come down.

— Tiff Macklem, Governor of the Bank of Canada

Deputy Prime Minister and Minister of Finance Chrystia Freeland assured Saturday that the Government of Canada does not x27;was not going to add fuel to the fire in its next budget and that it was going to address some of the causes of inflation as well as labor and housing policies.

< p class="e-p">We are convinced that the Bank of Canada has the necessary tools and expertise to do this job, she said during a telephone press briefing. Ms. Freeland also emphasized the independence of the Bank of Canada.

Tiff Macklem spoke to the Canadian Federation of Independent Business on Thursday, a day after the 100 basis point interest rate hike by the Bank of Canada.

Based on text by CBC's Thomson Reuters

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