Tiff Macklem, who spoke to the Canadian Federation of Independent Business (CFIB) a day after Wednesday’s shock rate hike of 100 basis points, also urged small business owners to avoid building the current rate increase into their contracts. “Inflation is in the high sevens,” Macklem said. “It will probably be over eight [per cent]. We have the next CPI [consumer price index] next week. We know that oil prices were very high in June, so I wouldn’t be surprised to see them go higher.” Canadian inflation was 7.7 percent in May, the highest since January 1983. Analysts polled by Reuters expect June inflation to reach 8.3 percent, which would be the highest since 1982 .The latest figures will be released on Wednesday at 8:30 AM. E.T. Macklem reiterated that the Bank of Canada now expects inflation to average around 8% for the next few months, before falling to around 3% by the end of 2023 and to a target of 2% in 2024. ATTENTION: Increase in interest rates by 1 percentage point called “unusual”:
The Bank of Canada is raising interest rates massively to fight inflation
A rise in lending rates was expected amid runaway inflation, but experts were still surprised by the size of the boost – the biggest in almost 25 years. Deputy Prime Minister Chrystia Freeland, who also serves as Canada’s finance minister, said Saturday the federal government is responding by “not adding fuel to the flames” through its budget and addressing some factors of inflation, as well as jobs and housing policies. . . “We are confident that the Bank of Canada has the tools and expertise to do this job,” he told reporters in a telephone briefing, noting the bank’s independent role.
“Don’t build it into salary contracts”
Macklem also made it clear that the bank is concerned about a wage-price spiral, where businesses raise wages to keep workers and then pass the higher costs on to consumers who then want higher wages to offset inflation. “You can see this creates a self-perpetuating cycle,” he said, adding that the central bank would take the necessary steps to bring inflation back to target. “So as a business, don’t plan on maintaining the current rate of inflation. Don’t build it into long-term contracts. Don’t build it into wage contracts. It will take some time, but you can be confident that inflation will come down.” CFIB said it could not release the scheduled recording of Thursday’s webcast due to a technical error, so its transcript was published late the next day.
