Canada’s inflation rate has probably hit its highest in nearly 40 years, according to a Bloomberg survey of economists.
Statistics Canada data due next week are expected to show the consumer price index rose 7.3 per cent in May from the previous year. That would be the fastest yearly pace since 1983, and will all but cement expectations for a 75-basis-point interest rate hike from the Bank of Canada at its next meeting.
Wednesday’s report will incorporate used car prices for the first time, and will give more weight to gasoline in the basket of goods and services, under a methodological change announced earlier this week. Annual price gains hit a three-decade high of 6.8 per cent in April.
The Bank of Canada has warned that inflation will move higher in the near term, and officials have consistently revised upwards their forecasts over the past year. The bank sees stubborn pressures persisting, and has signaled its policy interest rate will more likely head toward the higher end of the 2 per cent to 3 per cent neutral range. Having held at an emergency pandemic low of 0.25 per cent until March, it now sits at 1.5 per cent after hikes at three consecutive meetings.
A three-quarter-point increase at the July 13 decision is about 80 per cent priced in by markets. Many economists also now expect the Bank of Canada to follow the Federal Reserve’s lead in launching a super-sized increase to borrowing costs.
Though Canada’s six largest commercial banks have replied to Bloomberg’s inflation survey, it isn’t yet final. Forecasts were received from 15 economists as of 4:30 pm Friday in Ottawa. More responses may be added, possibly changing the median estimate.