Businesses are still expecting to pass on bigger price hikes to consumers amid fears the Bank of Canada’s inflation fight has stalled, according to the central bank’s own surveys.
Roughly half of businesses say their pricing practices are “not yet back to normal” after a year and a half of interest rate hikes designed to tamp down inflation, the Bank of Canada’s quarterly business outlook surveys released Monday show.
“On balance, firms are still planning to make larger and more frequent price increases than they did before the COVID‑19 pandemic,” according to the surveys.
Businesses do largely expect that their prices will rise at a slower rate than in the past year as pressures on their own input costs ease.
The Bank of Canada has flagged that it is looking for a normalization in business’ pricing behaviours as it weighs whether interest rates will need to rise further to get inflation all the way back to its two per cent target.
The Bank of Canada’s next interest rate decision is set for Oct. 25.
Firms’ inflation expectations are edging lower as the rapid rise in interest rates since March 2022 helps tame price pressures, the Bank said Monday. But inflation expectations “remain high,” the central bank added, with many businesses expecting it will take longer than three years to get inflation back to target.
A separate survey of consumers also released on Monday show that Canadian households still have high expectations for inflation in the coming year, with many believing the impact of higher interest rates “are far from over.”
More to come.
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