While inflation is considered to be a threat to Canadians over the next few years, many believe it is not a legitimate or rational one. The country's housing frenzy and rising commodity pricing have yet to put any doubt into the Bank of Canada's handling of prices.
A Canadian Chamber of Commerce survey polled just over 15,000 employers over the months of February and January and there were some interesting findings: only 14% of companies polled had intentions of raising prices in the next couple months, irregardless of indications of the soaring costs of materials like lumber, pallets and shipping containers.
This was consistent with Statistics Canada's latest inflation data. “Overall, inflation has not become a bigger concern for Canadians, and the pandemic has not dramatically changed consumers’ views on inflation,” stated the BoC in its most recent quarterly poll regarding consumer expectations.
If homeowners and execs foresee rising costs, they'll set higher prices in return for goods, labor and services. Something the central bank would disrupt with a rise in interest rates, even as the Canadian economy could still better itself under additional periods of governmental aid.
Inflation is always going to be something you can’t ignore,” Chris Fowler, chief executive of Canadian Western Bank, said in a recent interview. Official data has continued to indicate economic vulnerability. The consumer price index, a tool the BoC uses to lead its interest-rate configuration, was at just over 1 percent in February. That's right around the bank's sweet spot, one to three percent. The bank aims to have inflation levels somewhere in the middle.
Both Statistics Canada and the central bank found out early into the pandemic that spending activity had changed drastically. They followed with an additional value to the CPI, that looked more closely into things that were purchased during and for the lockdowns, such as groceries and toilet paper and larger homes purchased in the countryside or suburbs. Consequently, they took the microscope off of things that were mostly out of consumer reach, like airline tickets and vacation accommodations.
The new CPI had remained untouched from January, hinting that Tiff Makclem and his cohorts shouldn't be too preoccupied with inflation when they convene for an interest-rate meeting on April 21.
The bank's latest Business Outlook survey indicates a more serious level of concern regarding inflation than the chamber's figures. The BoC survey discovered that for the most part, companies were optimistic (polling took place before the latest slew of restrictions.)
Several respondents indicated they anticipated a rise in input and output costs over the next 12 months, a change from the last quarter. Just under 15 percent of executives anticipate the inflation to eclipse 3 percent, twice the amount recorded in the preceding survey.
At this time, the Bank of Canada is likely to be guided by consumer expectations regarding inflation to be right around 2 percent a year from now and at just about 3 percent in two years.