BoC expected to raise rates again this week, vying to quash inflation faster

The interest rate announcement is scheduled for Wednesday, just over one month after the central bank hiked its key rate by a quarter of a percentage point, bringing it to 4.75 per cent.

But the overall picture suggests inflation is still sticky, wage growth is high and the economy continues to churn, she said. Among the indicators it tracks, the Bank of Canada has been monitoring the labour market closely. The central bank has warned that the pace of annual wage growth, which has been hovering in the four to five per cent range, is not compatible with its two per cent inflation target without productivity gains.

The central bank's recent business outlook survey also said that for the first time since the beginning of the pandemic, businesses on balance expected slower wage growth over the next year. On the inflation front, price growth has eased considerably since last year. Inflation in May slowed to 3.4 per cent, down from its peak of 8.1 per cent last summer. But much of the deceleration in inflation is attributed to lower energy prices, while other prices have continued to rise.The Bank of Canada and private-sector economists say the challenge ahead will be getting inflation back to the two per cent target.

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