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Consumers believe inflation has fallen, but their expectations for inflation in the near term are showing little progress in returning to pre-pandemic levels. Slow progress may be due to persistently high inflation expectations for services such as rent. In addition, consumers increasingly think domestic factors, such as high government spending, are supporting high inflation, and they believe these factors will take longer to resolve than global factors. Consumers have adjusted their behaviour in response to prolonged high inflation—more people are paying attention to inflation and changing their spending habits. However, actions that may support inflation, such as seeking wage increases to offset it, are dissipating. The negative effects of high interest rates are broadening, and indicators of household financial stress are deteriorating. Consumers remain uncertain about the economic outlook, and this uncertainty is weighing on their spending plans. Workers think the labour market has weakened slightly. However, expectations for wage growth remain high, supported by cost-of-living adjustments in some workers’ wage contracts.

This is an account of the deliberations of the Bank of Canada’s Governing Council leading to the monetary policy decision on December 6, 2023.

In his year-end remarks, Governor Tiff Macklem discusses how lessons learned from recent economic volatility are reshaping the way the Bank of Canada conducts economic analysis and communicates with the public.

Speaking a day after we decided to hold interest rates steady at 5%, Deputy Governor Toni Gravelle discusses immigration, inflation and the role that newcomers play in helping our economy grow.

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.