The Bank of Canada is making some progress in its bid to convince the public it’s serious about curtailing price pressures, a new poll shows.
(Bloomberg) — The Bank of Canada is making some progress in its bid to convince the public it’s serious about curtailing price pressures, a new poll shows.
The share of Canadians who expressed some confidence that the central bank remains committed to its 2% inflation target jumped to 57%, according to a Nanos Research Group survey conducted for Bloomberg News. That’s up from 49% in May.
The pick-up in confidence is a welcome development for policy makers led by Governor Tiff Macklem. The Bank of Canada is in the middle of one of its most aggressive interest-rate hiking cycles ever to quell inflation that has hit four-decade highs and is hovering at around 8%.
The accelerated hikes are in large part a confidence-building exercise to convince Canadians that officials remain focused on cooling price pressures and bringing inflation back down to the central bank’s target.
Expected inflation is a major determinant of actual inflation, since businesses increase prices and workers seek pay raises in part on what they anticipate prices will look like in future. That’s why policy makers have become very concerned about the self-fulfilling dynamics of persistently high inflation.
Still, the Nanos poll shows there is still plenty of work to do to ease worries about inflation. Asked what they think annual inflation will be in 12 months, more than 80% of respondents said it would be above 5%. The median estimate was 8%.
The central bank has already raised its benchmark overnight lending rate to 2.5% from 0.25% in early March. Economists expect it will jump to 3.25% at a policy decision next week and to 3.75% by the end of the year. Rates commercial banks give to their prime customers are typically just over 2 percentage points above the Bank of Canada benchmark.
Nanos found 19% of respondents were confident the Bank of Canada was committed to hitting its inflation target, while 38% said they were somewhat confident. About 20% of Canadians said they weren’t confident, while another 19% said they were somewhat not confident. The poll is a hybrid telephone and online survey of 1,073 Canadians, with a margin of error of 3 percentage points, taken between Aug. 27 and Aug. 29.
The Bank of Canada’s mandate requires it to keep inflation within its 1% to 3% control range as much as possible. Operationally, that has meant aiming for a 2% target. Annual inflation has exceeded the upper band of that range for 16 straight months.
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