Canadian consumer expectations for inflation reach record high levels: Survey

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The Bank of Canada has revealed the result of the first-quarter survey, indicating that Canadian consumer expectations for one year and two years from now continued to increase and reached record high levels.

According to the online survey conducted by the central bank on Monday, one-year-ahead inflation rate expectations reached 5.07 per cent and two-year-ahead inflation rate expectations 4.62 per cent, Xinhua news agency reported.

Survey respondents expressed the belief that three main issues were making inflation harder to control: supply chain issues, the persistence of the pandemic and high government spending.

Most expected supply chain issues to persist for at least one to two years. Respondents also suggested that prices would likely not decline even after supply chain issues are resolved because businesses need to restore their profit margins.

Increases in near-term inflation expectations, however, were not feeding into those for the longer term, according to the survey.

Consumers’ long-term expectations remained relatively stable and below their pre-pandemic level with five-year-ahead inflation rate expectations staying at 3.23 per cent.

This suggests that inflation expectations are well anchored. Survey respondents generally felt that once the pandemic ends and supply issues fade, the Bank of Canada will be able to achieve its inflation target.

Although workers anticipated significant price increases in the near term, they believed their wages would increase only modestly. This was a source of dissatisfaction for them, the survey revealed.

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