Canadians' faith in central bank’s handle on inflation is, at best, tenuous

BoC under pressure to act, but an increase of just 1% might not be the best move for the market

Canadians' faith in central bank’s handle on inflation is, at best, tenuous

A recent Angus Reid Institute (ARI) poll reveals that Canadians' trust in their nation's central bank to control inflation is, at best, tenuous.

The findings showed that 41% of respondents stated they lacked confidence in the Bank of Canada to carry out its mandate of bringing inflation back to 2%. Only 46% of people indicated they had faith in the central bank.

When the findings are broken down by political party, the level of doubt increases.

According to ARI, 86% of People's Party of Canada voters and 59% of Conservative Party of Canada voters stated they lacked confidence in the central bank.

In contrast, 47% of NDP voters and 69% of Liberal supporters stated they had confidence in the bank during the most recent federal election.

The survey was conducted from June 7-13 and polled 5,032 Canadians.

Pressure is mounting on the Bank of Canada to bring inflation down after Statistics Canada’s latest consumer price index surged at the fastest rate since 1983. Much of Bay Street now expects the bank to deliver a three-quarter point interest rate hike in July; some economists and strategists, such as those at JPMorgan, have said there’s a possibility the bank could opt for a full-point hike.

However, one well-known economist cautioned that increasing rates by one percentage point might project the wrong message to the market.

Benjamin Tal, CIBC Capital Markets' deputy chief economist, told BNN Bloomberg in an interview that he anticipates a three-quarter point rate increase next month because a hundred-basis point increase would signal weakness from the central bank and create the impression it is not in control of inflation.

The ARI study found that 45% of respondents stated their financial situation is worse now than it was at this time last year due to the growing cost of living, the greatest percentage in at least a dozen years.

Approximately a third (34%) believe their financial situation will get worse during the coming year.

Gas and groceries continue to be major strains on household budgets. 52% of Canadians claim that it is difficult to put food on the table, with lower-income households being more likely to report this.

Most drivers reported that they occasionally chose to remain in rather than leave the house to save money on petrol, while others went out of their way to get cheaper gas at a different gas station or chose to take alternative modes of transportation in place of driving.