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Monetary policy is working to reduce price pressures in the Canadian economy. Core inflation is expected to ease gradually, while the path of CPI inflation will be bumpy.

Results from the Business Outlook Survey and the Business Leaders’ Pulse continue to signal weak demand, which is weighing on investment and hiring plans. While few firms are planning layoffs, labour markets are widely seen as continuing to soften. Although they remain above average, wage and inflation expectations are easing. Most firms that made abnormally large price increases in the past 12 months do not plan to do so again in the coming year.

Consumers’ perceptions of inflation are unchanged from a quarter ago, but their expectations for near-term inflation declined significantly. While both measures have improved substantially in recent quarters, they remain higher than they were before the COVID‑19 pandemic. Most consumers continue to think that domestic factors are contributing to high inflation. Sentiment remains subdued and unchanged from last quarter, as high inflation and elevated interest rates continue to constrain people’s budgets. Perceived financial stress remains high, most consumers continue to report spending cuts, and pessimism about future economic conditions persists. Canadians’ perceptions of the labour market have weakened this quarter, especially among private sector employees. Yet overall wage growth expectations reached a new survey high, driven by public sector employees.

Governor Tiff Macklem talks about how the labour market has adjusted to higher interest rates and slower economic growth. He also discusses how a strong, inclusive labour market is key to growth in the long run.

This is an account of the deliberations of the Bank of Canada’s Governing Council leading to the monetary policy decision on June 5, 2024.