The effects of the war in Iran undermined business confidence and led to a sharp increase in inflation expectations in the second quarter, the Bank of Canada’s most recent business outlook survey suggests.
A rise in input costs and geopolitical uncertainty linked to the conflict has also lowered sales expectations for most businesses outside the oil and gas sector in Western Canada, the findings show. At the same time, inflation expectations increased sharply among those surveyed.
Most of the interviews conducted by the Bank of Canada were in May, a period of heightened uncertainty surrounding the war. Subsequent interviews showed that inflation expectations peaked in April and continued to decline following the signing of a peace treaty in mid-June….