The Bank of Canada yesterday warned of “bumps along the way” to beating inflation. Another increase in the 3.25% prime Bank rate is due October 26, the sixth hike this year..“There could be bumps along the way,” Deputy Governor Carolyn Rodgers told reporters. Inflation is currently 7.6% by Statistics Canada estimate..“The longer inflation expectations remain high the greater the risk that elevated inflation becomes entrenched,” said Deputy Rodgers. “If that were to happen higher inflation could become self-fulfilling and a damaging cycle would be set in motion.”.According to Blacklock's Reporter, when a reporter asked if the era of outsized rate hikes is "over" for the Bank, Rogers replied, “We’ll take the next decisions with the information we have in front of us at the time.".“Does the Bank still believe a soft landing is possible?” asked a reporter. “We think there is room in the economy to cool it and stay in positive growth territory,” replied Rogers..The Canadian Federation of Independent Business yesterday said surveys of its membership confirmed most had raised prices to recover inflationary costs, and most were carrying pandemic-related debts. “62% of small businesses are still saddled with pandemic debt for an average of $158,000,” Simon Gaudreault, chief economist with the Federation, said in an interview. “Doing business in Canada is becoming too costly.”.The Federation in a report said 79% of operators surveyed had imposed higher-than-usual price increases in the past year. A third planned additional increases of 6% or more next year..Bank Governor Tiff Macklem had not commented on Tuesday’s rate hike. Macklem earlier warned Canadians should expect a painful economic slowdown this winter..“Yes, the economy is going to slow,” Macklem said July 13. “The economy needs to slow. We need to take the steam out of inflation.”.“We do have a material reduction in growth,” said Macklem. “We are forecasting growth this year at 3.5% moving down to 1 3/4% next year. That is a material reduction in growth. That does imply some pain.”.“Why should Canadians trust your inflation forecasts going forward?” asked a reporter. “It is important that we are accountable,” replied Macklem..“We’ve done our best,” said Macklem, adding: “We expect interest rates will need to rise further to cool demand and bring inflation back to target,” about 2% annually..The Governor in 2020 incorrectly predicted inflation would “remain less than 2%.” Macklem last October 27 mistakenly forecast it would average “close to 5%.” As late as last January 26 he claimed it would peak “just above 5%.”
