Bank of Canada Surveys Show Sticky Inflation Expectations and Wary Businesses

Fresh surveys from the Bank of Canada point to persistent inflation worries and a cautious mood among households and firms. The second-quarter Canadian Survey of Consumer Expectations found that near-term inflation expectations remain elevated amid ongoing trade tensions and rising concerns about oil and energy prices tied to the war in the Middle East. Consumers continued to view the economic environment as challenging, with high prices and uncertainty weighing on spending plans, although perceptions of the labour market improved modestly as fears of job loss eased in trade-sensitive sectors. A parallel Business Outlook Survey showed firms' sentiment had deteriorated, with domestic sales outlooks weakening amid geopolitical uncertainty and elevated fuel costs, even as export prospects improved on stronger commodity demand. More companies said they expect input and selling prices to rise, and their inflation expectations climbed. The findings complicate the picture for the central bank, which has held its policy rate at 2.25%, as it weighs sticky price pressures against signs of soft demand. Policymakers will factor the results into upcoming rate decisions.