Canadian businesses see inflation pressures growing

OTTAWA, April 4 (Reuters) – Rising energy and food costs
will push consumer inflation in Canada toward the upper end of
the central bank’s comfort zone, business leaders said in a
survey released on Monday.

The results of the Bank of Canada’s first-quarter business
outlook survey could pressure the bank to raise its key
interest rate by mid-year as it seeks to keep inflation at the
midpoint of its 1-3 percent target range.

Fifty-eight percent of the senior business managers who
participated in the poll predicted the annual inflation rate
would be between 2 percent and 3 percent over the next two
years, up from 44 percent who thought that in the fourth
quarter of last year.

The percentage who saw inflation at the lower end of the
range at 1-2 percent fell to 21 percent from 47 percent.

“Driven by food and energy prices, expectations regarding
total CPI inflation over the next two years rose in this
survey,” the bank said in a release, while noting that the
majority still see CPI staying within the acceptable range.

Overall, companies remained upbeat in the first quarter
about the economic outlook. They expect sales to grow faster
over the next year, they intend to invest more in machinery and
equipment, and they plan to hire more workers.

However, on balance, they were slightly less bullish on
future sales and investment intentions than in the fourth
quarter of last year, a trend the bank attributed to the robust
gains already seen in both indicators.
(Reporting by Louise Egan; editing by Peter Galloway)

Canadian businesses see inflation pressures growing