Plus: Is the Bank of Canada referring to price gouging by corporations?
The Bank of Canada is seemingly considering taking “corporate pricing behaviour” into account in its quest to bring inflation down to its 2% target, according to analysts.
“Governing Council will continue to assess the dynamics of core inflation and the outlook for CPI inflation,” the central bank said in its June 7 policy announcement. “In particular, we will be evaluating whether the evolution of excess demand, inflation expectations, wage growth, and corporate pricing behaviour are consistent with achieving the inflation target.”
In an interview with BNN Bloomberg, Alberta Central chief economist and former BoC economist Charles St-Arnaud said that the statement should be read as the central bank evaluating “whether or not higher costs are being absorbed by corporations or being passed right to consumers.”
However, St-Arnaud also said that the statement has room for public misinterpretation.
“I think some people might see that as, ‘Oh, is the bank saying implicitly that they’re seeing price gouging from corporations?’ I don't think that’s what they’re saying. I think it’s more in terms of general pricing behaviour… I think they’re more looking into how quickly corporations are passing higher cost to their customers.”
Economist Jim Stanford told BNN Bloomberg that the central bank’s reference to corporate pricing is an important step in moderating inflation beyond the traditional drivers like the labour market.
“I think it indicates that the Bank of Canada has recognized that corporate pricing and profit strategies have played a role in our current inflationary upsurge,” Stanford said. “This is belated, but welcome recognition that inflation can arise from profits, not just from wages.”
Still, Stanford warned that the BoC has not yet fully committed to addressing the impact of corporate pricing.
“It’s cold comfort in a way that the bank has acknowledged profits might be the problem, but they’re still using high interest rates, which is aimed clearly at work and wages, to solve the problem,” he said.
