Bank of Canada chief: Inflation expected to top 8% as early as next week

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Bank of Canada Governor Tiff Macklem attends a news conference in Ottawa, Ontario, Canada April 13, 2022. REUTERS/Blair Gable

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OTTAWA, July 16 (Reuters) – The Bank of Canada expects inflation to hit “just over” 8% as early as next week when data is released for June, and to stay within that range for a few more months, Governor Tiff Macklem said. a business group in a webcast transcript released Friday evening.

Macklem, who spoke to the Canadian Federation of Independent Business in the aftermath of Wednesday’s shock 100 basis point interest rate hike, also urged small business owners to avoid integrating into the current pace. price increases in their contracts. Read more

“Inflation is high at seven. It’s probably going to be above just over eight (8%). We’ll have the next CPI next week. We know oil prices were very high in June, so I wouldn’t be surprised to see it increase,” Macklem said.

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Canadian inflation was 7.7% in May, the highest since January 1983. Analysts polled by Reuters expect June inflation to hit 8.3%, which would be the highest since 1982 The data will be released Wednesday at 8:30 a.m. ET (12:30 p.m. GMT). ).

Macklem reiterated that the Bank of Canada now expects inflation to average around 8% over the next few months and then fall to around 3% by the end of 2023 and on target. 2% in 2024.

Canadian Deputy Prime Minister Chrystia Freeland, who is also finance minister, said on Saturday the federal government was responding by “not pouring fuel on the flames” through its budget and tackling some of the engines inflation as well as labor and housing policies. .

“We are confident that the Bank of Canada has the tools and the expertise to do this job,” she told reporters on a conference call, stressing the bank’s independent role.

Macklem also clarified that the bank is very concerned about a wage-price spiral, where companies raise wages to keep workers, then pass the higher costs onto households, who then want higher wages to offset inflation. .

“You can see it creates a self-perpetuating cycle,” he said, adding that the central bank would take the necessary steps to bring inflation back on target.

“So as a business, don’t expect the current rate of inflation to remain. Don’t build that into longer-term contracts. Don’t build that into wage contracts. It will take time, but you can be confident that inflation will come down.”

CFIB said it could not release its scheduled recording of Thursday’s webcast due to a technical issue. The business group released its transcript on Friday evening.

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Reporting by Julie Gordon in Ottawa; Editing by Nick Macfie and Diane Craft

Our standards: The Thomson Reuters Trust Principles.

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