At the same time, companies are reporting improvements in labour shortages and other supply constraints, while many expect wages to keep rising quickly.
This aligns with the central bank’s forecast of near-zero growth over the first three quarters of 2023. “Today’s releases should encourage the Bank of Canada to remain on hold at its policy announcement next week,” James Orlando, Toronto-Dominion Bank’s director of economics, wrote in a note to clients Monday.
New surveys from the Bank of Canada suggest business and consumer expectations of future inflation are tracking down, but a potential recession continues to weigh on economic outlooks.Canadian businesses and consumers continue to expect inflation to remain worryingly high, although these expectations have declined over the past several quarters alongside the actual fall in Consumer Price Index inflation. Annual CPI inflation was 5.2 per cent in February, down from a peak of 8.
The central bank cares about inflation expectations because beliefs about future prices can affect company price-setting decisions and employee wage demands in a self-fulfilling manner. “For the first time in several quarters, businesses no longer expect labour costs to put upward pressure on their output price growth,” the bank added.
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