The Bank of Canada’s second-quarter business-outlook survey captures a period of heightened uncertainty, as firms braced for the fallout of elevated energy costs. Conducted largely in May, the data reveals that businesses intended to aggressively pass rising input costs onto customers, pushing expectations for price hikes to levels not seen since early 2023. However, the survey’s findings may already be dated. Much of the data collection occurred before a diplomatic deal between the U.S. and Iran eased tensions and oil prices retreated from their May peaks of nearly $110 a barrel to roughly $69.

Governor Tiff Macklem acknowledged that the recent Middle East truce has tempered some inflationary pressure, though the central bank remains wary of the transition from energy costs to broader consumer prices. While inflation reached a two-year high of 3.2% in May, officials have maintained the main interest rate at 2.25%. With the economy showing signs of a rebound and growing at an annualized rate of over 2% in the second quarter, policymakers are balancing the need to avoid overreacting to energy volatility against the risk of persistent, long-term price acceleration.