The prevailing view in consumer and business surveys is that the Bank of Canada will ultimately control inflation. At the same time, these surveys clearly suggest inflation expectations have moved up and are becoming more dispersed, with more respondents now seeing high inflation persisting.
Financial stability in the euro area Turning to the impact on the financial sector, overall financial stability conditions have deteriorated this year. Rising inflation and the worsened economic outlook in combination with tighter financing conditions are aggravating pre-existing vulnerabilities in both the non-financial and non-bank financial sectors – while in the banking sector profitability is, at least partly, supported by higher interest rates.