Suppliers bake in price increases as inflation fears rise

July 26, 2021

Canadian business expectation of price and wage hikes this year. | CFIB

While the Bank of Canada claims the apparent increase in the inflation rate is “transitory” and temporary, manufacturers and suppliers are baking price increases into their sales forecast, according to the Canadian Federation of Independent Businesses (CFIB).
Following a June 2021 survey, CFIB said businesses now plan to boost prices by an average of 4.7 per cent in the next 12 months, and increase wages by 2.4 per cent.
However, the Bank of Canada’s last monetary policy report in April forecast inflation at just 2.3 per cent in 2021—and 1.9 per cent next year.
It will take some time to see if the Bank of Canada is correct in its forecast for low inflation numbers. And it will be important for the housing industry, according to mortgage professionals.
For, should inflation increase sharply, as most business leaders contend, the Bank of Canada could be forced to raise interest rates. While most economists now predict the central bank rate based on the current 0.25 per cent until late 2022, higher inflation could signal a much earlier rate hike.