Business Outlook Survey―Fourth Quarter of 2021

Inflation expectations are elevated

Expectations for total consumer price index inflation have moved up further, with two-thirds of firms now expecting inflation to be above 3% over the next two years (Chart 11). As in the previous survey, businesses noted several factors driving higher inflation, including:

• supply chain disruptions
• prices for gasoline, other energy products and food staples
• the impact of expansionary monetary and fiscal policies

Upward wage pressures on inflation were also cited more frequently, particularly by firms that anticipate inflation will remain above the target of 2% over a longer period. That said, in response to a special question, most firms said they expect currently elevated inflationary pressures to dissipate over time, with inflation returning close to target in one to three years.