Recent surveys by the Bank of Canada reveal that both consumers and business leaders anticipate inflation to surpass 3% over the next 12 months. This expectation is largely driven by economic uncertainties stemming from the ongoing conflict in the Middle East and the implementation of U.S. tariffs.
The Bank of Canada's quarterly Business Outlook Survey indicates that firms expect inflation to range between 3% and 3.5% over the coming year. This projection marks a four-year high, with expectations peaking in April before declining following a ceasefire in the Middle East in mid-June.
Similarly, the Canadian Survey of Consumer Expectations highlights that a slightly larger proportion of consumers than in the previous quarter expect inflation to be above 3% over the next 12 months. While tariffs remain the most frequently cited driver of inflation, mentions of energy prices have risen sharply from the previous quarter.
These findings underscore the significant impact of global events and trade policies on Canadian inflation expectations. The Bank of Canada continues to monitor these developments closely to inform its monetary policy decisions.