Expect inflation to officially be over 8% and stay there a few months, Bank of Canada governor warns - Action News
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Expect inflation to officially be over 8% and stay there a few months, Bank of Canada governor warns

The Bank of Canada expectsinflation to go "a little over" eight per cent as soon as next week, whenJune's data is released, and stay in that range the next few months, the central bank's governor tells a business group in a webcasttranscript released late Friday.

May's inflation rate of 7.7% was the highest since 1983

Governor of the Bank of Canada Tiff Macklem speaks at a press conference in Ottawa on Thursday, June 9, 2022.
Tiff Macklem, the Bank of Canada's governor, is shown at a news conference in Ottawa on June 9. On Friday, he told independent businesses he expects inflation to surpass eight per cent soon, but recommended they not build that inflation rate into longer-term contracts, because it 'will come down.' (Patrick Doyle/The Canadian Press)

The Bank of Canada expectsinflation to go "a little over" eightper centas soon as next week,whenJune's data is released, and stay in that range for a few moremonths, the central bank's governor told a business group in a webcasttranscript released late Friday.

Tiff Macklem, who spoke to the Canadian Federation of IndependentBusiness (CFIB) a day after Wednesday's shock 100-basis-pointinterest rate hike, also urged small business owners to avoidbuilding the current pace of price increases into theircontracts.

"Inflation is high sevens," said Macklem. "It's probably going to go alittle over eight [per cent]. We have the next CPI [consumer price index]next week. We knowoil prices were very high in June, so I wouldn't be surprised tosee it move up."

Canadian inflation was 7.7 per centin May, the highest sinceJanuary 1983. Analysts surveyed by Reuters expect June inflationto hit 8.3 per cent, which would be the highest since 1982. The latest datawill be released on Wednesday at 8:30 a.m. ET.

Macklem reiterated the Bank of Canada now expects inflationto average around eight per centfor the next few months, then fall toaround three per centby the end of 2023 and to the two per cent target in 2024.

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Deputy Prime Minister Chrystia Freeland, who alsoserves as Canada's finance minister, on Saturday said the federalgovernment was responding by "not pouring fuel on the flames"through its budget and tackling some of the drivers ofinflation, as well as labour and housing policies.

"We are confident that the Bank of Canada has the tools andthe expertise to do this job," she told reporters in a telephonebriefing, noting the bank's independent role.

'Don't build that into wage contracts'

Macklem also made it clear the bank is concerned about awage-price spiral, where businesses raise wages to keep workersand then pass the higher costs on to consumers who then wanthigher wages to compensate for inflation.

"You can see this creates a self-perpetuating cycle," hesaid, adding the central bank will take the action needed to getinflation back on target.

"So as a business, don't plan on the current rate ofinflation staying. Don't build that into longer-term contracts.Don't build that into wage contracts. It is going to take sometime, but you can be confident that inflation will come down."

The CFIB said it could not release its planned recording ofThursday's webcast due to a technical glitch, so itstranscript was published late the next day.