In Canada, a growing number of companies expect the country’s inflation rate to remain well above 2% for 3 years or more, with a third of firms planning to substantially increase the prices of their products to customers, a quarterly Bank of Canada survey showed.

Nearly half of the companies surveyed, or 47%, expect to have to pay “substantially” more for resources, including raw materials needed to produce goods and services. The survey also indicated that companies expect to increase employee wages by an average of 5.8% over the next 12 months, up from 5.2% in the previous quarter, amid rising housing prices and the need to retain current employees and attract new ones.

The survey results are likely to strengthen the likelihood that the Bank of Canada will decide to raise its key rate by 0.74 points at its upcoming meeting, as almost all economists expect, MarketWatch writes. Canadian central bank officials tend to rely heavily on survey results when making monetary policy decisions.

The quarterly survey, conducted between May 9 and May 27, indicated that inflation shows no signs of slowing in the near term, forcing the regulator to follow through on promises to take decisive action to limit the pace of price increases.

Canada’s annualized inflation rose to a 39-year high of 7.7% in May, with economists expecting the consumer price index to exceed 8% in the coming months. At the same time, the target for the Canadian Central Bank is inflation at 2%.

Inflation expectations of companies increased compared to the previous quarter. About 21% of companies now expect inflation to remain “significantly” above the 2% target for at least three years, up from 14% of firms in the first quarter. Nearly 32% of companies expect inflation to remain above 2% for two to three years, up from 30% of firms in the previous quarter.

According to the survey, companies attribute the rise in inflation expectations to supply chain challenges, rising commodity prices and robust domestic demand.