Frequent price increases by businesses contributing to sticky inflation: BoC official

MONTREAL – Bank of Canada deputy governor Nicolas Vincent says businesses are still raising their prices more frequently and by larger amounts than they did before the pandemic, which is contributing to higher-than-expected inflation.

Vincent made the comments in his first speech as deputy governor today to the Chamber of Commerce of Metropolitan Montreal.

According to his prepared remarks, Vincent says the Bank of Canada believes that higher-than-expected inflation over the last year is “intimately linked” to larger and more frequent price increases from businesses.

Although he notes pricing behaviour by firms has been shifting closer to normal since the beginning of the year, that progress has been slow.

Recent research from the central bank shows price increases have mirrored the cost increases businesses have faced, but Vincent notes that even stable profit margins would mean customers are carrying the entire burden of higher prices.

Vincent says these recent discoveries about the effect pricing behaviour may be having on inflation is leading the Bank of Canada to question the relationship between inflation and its drivers.