Julie Gordon, David Ljunggren

OTTAWA, (Reuters) – Canadian firms are seeing labor shortages increasing and wage pressure rising, according to a Bank of Canada regular survey. Strong demand growth and constraints in supply chains can put upward pressure on prices.

In fourth quarter 2004, the highest recorded level of the Business Outlook Survey Indicator by the central bank was reached. It was done before Omicron Coronavirus started spreading.

This data will help the Bank of Canada calculate its next rate hike. According to the bank, it has been paying attention to inflation in wages and is expected to announce its next rate increase on January 26.

It said last October that it would raise rates by April 2022. However, some investors are expecting a rise this month. [BOCWATCH]

The survey stated that “both strong demand as well as supply bottlenecks are expected to increase prices in the following year.”

Businesses across all industries and locations are responding to the pressure to expand their capacity.

The central bank stated last month that Canada’s economy is experiencing significant slack.

The expectation of inflation for the next 2 years has increased. Two thirds of companies now expect that inflation will rise above central bank’s 13% control level over the next 2 years.

Answering a specific question, the majority of firms stated that they anticipated the inflationary pressures currently high to subside and inflation returning to the 2% target in the next 1-3 year.

Canada’s inflation rate in the year ended November at 4.7%, an 18-year peak. Analysts surveyed by Reuters expect it to reach 4.8% in December.

Canadian dollars traded 0.4% lower at 1.2504 against the greenback or 79.97 U.S.cents.