The Financial Post reports in its Tuesday edition that wages appear set to determine the pace at which the Bank of Canada raises interest rates over the rest of the year.
The Post's Stephanie Hughes writes that senior deputy governor Carolyn Rogers said last week the BOC is wary of a wage-price spiral, as workers take advantage of a record level of job vacancies to insist on salary increases that match this year's spike in the cost of living. That could entrench inflation, as employers likely would seek to recoup higher labour costs by charging more.
Ms. Rogers said a tight labour market is contributing to the BOC's determination that demand has exceeded the economy's ability to keep up with orders.
That is fuelling inflation, which clocked in at an annual rate of 7.6 per cent in July, slower than the previous month, but still well above the BOC's 2-per-cent target.
Workers are "looking at the rate of inflation and what it's doing to their purchasing power, their budgets, and they're looking at the same tight labour markets and they're thinking 'I need a raise,'" said Ms. Rogers.
Governor Tiff Macklem has said he is raising interest rates quickly to keep those expectations from taking root.
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