© Reuters. FILE PHOTO: Bank of Canada Governor Tiff Macklem attends a news conference in Ottawa, Ontario, Canada, April 13, 2022. REUTERS/Blair Gable
OTTAWA (Reuters) – Bank of Canada Governor Tiff Macklem told a business group that inflation will be “just above” 8 percent when June data is released as soon as next week Stay in that range for a few more months. In a transcript of the webcast released later Friday.
Speaking to the Canadian Federation of Independent Business a day after Wednesday’s shock rate hike of 100 basis points, Macklem also urged small business owners to avoid incorporating the current rate of price increases into their contracts.
“Inflation is high. It could be over eight (8%). We have the next CPI next week. We know oil prices were very high in June, so I wouldn’t be surprised to see it go up,” Macklem said. .
Canada’s May inflation rate was 7.7%, the highest since January 1983. Analysts polled by Reuters expect inflation to hit 8.3 percent in June, the highest since 1982. Data will be released Wednesday at 8:30am ET (1230GMT).
Macklem reiterated that the Bank of Canada now expects inflation to average around 8 per cent in the coming months before falling to around 3 per cent by the end of 2023 and hitting its 2 per cent target in 2024.
Canada’s Deputy Prime Minister Chrystia Freeland, who also serves as finance minister, said Saturday that the federal government’s response was to “not add fuel to the fire” through its budget and to address some inflation drivers as well as labour and housing policies. .
“We believe the Bank of Canada has the tools and expertise to do the job,” she told reporters in a phone briefing, noting the bank’s independent role.
Macklem also made it clear that banks are very concerned about a wage price spiral, where firms raise wages to retain workers and then pass higher costs on to households, who then want to raise wages to cover inflation.
“You can see this creates a self-perpetuating cycle,” he said, adding that the central bank would take necessary action to bring inflation back to target.
“So, as a business, don’t plan to maintain the current inflation rate. Don’t put it into long-term contracts. Don’t put it into wage contracts. It will take some time, but you can trust that inflation will come down.”
The CFIB said it could not release the Thursday webcast it planned to record due to technical glitches. The business group released its transcript late Friday.