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BoC chief sees inflation “just over” 8% as early as next week

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OTTAWA — The Bank of Canada expects inflation to be “just over” 8% when June data is released and remain in that range for several months, Governor Tiff Macklem told a business group in a webcast. transcript released late Friday.

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Macklem, speaking to the Canadian Federation of Independent Business a day after Wednesday’s shock 100 basis point interest rate hike, also urged small business owners not to build the current rate of price growth into their contracts.

“Inflation is seven high. It is likely to be just over eight (8%). Next week we have another CPI. We know oil prices were very high in June, so I wouldn’t be surprised if they went up,” Macklem said.

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Canadian inflation was 7.7% in May, the highest since January 1983. Analysts polled by Reuters expect June inflation to reach 8.3%, which would be the highest since 1982. The data will be released at 8:30 a.m. ET on Wednesday .

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Macklem reiterated that the Bank of Canada now expects inflation to average around 8% over the next few months, before falling to around 3% by the end of 2023 and to a 2% target in 2024.

He also made it clear that the bank is very concerned about the wage-price spiral, where businesses raise wages to keep workers and then pass the higher costs on to households, who then want higher wages to compensate for inflation.

“You can see it creates a self-perpetuating cycle,” he said, ing that the central bank would take the steps needed to bring inflation back to target.

“So as a business, don’t plan for the current rate of inflation to remain. Don’t build it into longer term contracts. Don’t build it into wage contracts. It will take some time, but you can be sure that inflation will come down.”

The CFIB had planned to release a recording of the webcast on Thursday, but due to a technical glitch it was not actually recorded, it said. Instead, the trade group posted a transcript on its website late Friday night.

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