In a speech at the CDHo Institute on Thursday, Lieutenant Governor Sharon Kozicki said central banks increasingly rely on non-traditional data and dialogue with Canadians to understand how trade uncertainty and rising interest rates affect households and businesses.
She said the insights helped set the bank’s policy rate at a decision of 2.75% this week.
“Most businesses expect activity to weaken in the short term, which puts jobs at risk,” she said. “Companies talk about rising costs, which could mean they need to raise prices at some point.”
While many mortgage holders hope to get more interest rates soon, Kozicki’s remarks suggest that more patience will be needed before we see additional cuts.
“Canadians face greater uncertainty again about the uncertainty of the future. It is important that people continue to trust us to be a stable hand during these turbulent times.”
Insights beyond data
Kozicki noted that even if Statistics Canada’s traditional data showed a softening of the economy, the granular feedback from the bank’s publicity and investigations were crucial. “These surveys help us to see how the current economic situation in communities across Canada can play,” she said.
The challenge for families is housing affordability, which is a common problem during visits to the bank community.
“When I met with representatives in the information technology sector in Ottawa, I heard that housing costs are high, making it difficult for companies to attract new employees outside the field,” Kozki said. “In conversations with people working in the social service sector, affordability has also emerged. They talk about seeing an increase in the number of people using food banks and experiencing homelessness.”
The bank also heard concerns about increased mortgage payments and hesitation in making large purchases. Canadians affected by trade conflict and sectors engaged in export-dependent export dependencies are less secure and are withdrawing from spending, according to the bank’s survey of Canadian consumer expectations released earlier this year.
“They say they are more likely to reduce spending on durable items such as furniture and appliances, as well as non-essentials like dining in restaurants and holidays,” Kozicki added.
What does this mean for mortgage rates
Even as title inflation eases, consumers’ expectations for future inflation are getting higher and higher. “With all the discussion about tariffs, consumer inflation expectations have increased in the last two years,” Kozicki noted. He noted that ongoing uncertainty is a key factor in increasing these expectations.
This expectation, coupled with ongoing cost pressures reported by businesses, could keep banks cautious about future cuts and extend delays to further mortgage rates.
Now, at the next policy meeting on July 30, the chances of Canadian banks cutting a Canadian bank are now priced around 75%, but the decision will largely depend on key economic data released in the next two months.
Meanwhile, fixed mortgage rates have risen in recent weeks as bond yields rise, reflecting uneasy inflation and trade tensions in the market.
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Last modified: June 5, 2025
