The Bank of Canada has started looking more closely at the role of company profits in its fight against persistent inflation, and the idea was gestured at again on Wednesday along with news of the latest interest rate hike.

As the central bank announced it would boost its key benchmark rate by 25 basis points to five per cent, it highlighted “corporate pricing behaviour” as a key area it is watching going forward, along with excess demand, inflation expectations and wage growth.

Its news release also noted the “underlying price pressures” in inflation are being reflected by businesses, which are “still increasing their prices more frequently than normal,” according to the Bank of Canada’s own surveys.


The Bank of Canada’s reference in June to corporate pricing behaviour piqued the interest of some economists and observers who wanted the central bank to take a closer look at business’ role in rising consumer prices. 

Other central banks around the world, such as the European Central Bank, have also shifted to tougher scrutiny on corporate roles in inflation.

Jagmeet Singh, leader of Canada’s New Democrats, has since called for a tax on excess corporate profits to help ease inflation.

The central bank’s July monetary policy report also made mention of the concept, and appeared to point the finger at foreign companies for persistent goods inflation in 2023.

“Some possible explanations behind the stronger-than-expected goods price inflation include … slower normalization of pricing behaviour by firms abroad,” the report said. “Strong global demand may have motivated businesses to pass through ongoing cost reductions more slowly than anticipated, partly explaining higher-than-expected import prices in 2023.”

Jennifer Robson, Political Management program director at the University of Ottawa, said July’s discussion of corporate pricing behaviour from the Bank of Canada was “limited,” with just a “passing mention” in the rate announcement.

But the reference to foreign firms stood out to her, she told in an email.

“I think it’s striking that the Bank is talking about the issue as one of foreign firms when their own business survey suggest a strong majority of Canadian corporations are telling the Bank they think inflation will be above three per cent for the next two years. Those expectations have to be factoring into forward-looking pricing decisions,” she wrote.

Robson also said she found it “strange” that the Bank is “speculating” about firms potentially being slow to pass increased input costs on to consumers, when her own research into company’s communications to their investors suggests the opposite.

“They’re clear that they made pricing choices in 2022 that are paying off today in higher overall revenues and are happy these are off-setting lower volumes of sales,” she said.

Economist Jim Stanford, director of the Centre for Future Work, said Wednesday’s statement was thin on insight into how the Bank of Canada is assessing the role of corporate pricing when it comes to inflation.

“I don't see any evidence that they're following through on that,” Stanford told in a telephone interview.

He said he thinks the bank should widen its view as it considers the “multi-dimensional nature of this current inflation.”

Stanford pointed to the grocery industry, which is still seeing elevated food prices despite production and distribution costs falling, as one area where the central bank could look closer at what is keeping prices high.

“That's just one example of many where the Bank of Canada needs broader, and I would say more nuanced analysis of what's causing this inflation and what to do about it.”