In a speech Thursday at the C.D. Howe Institute, Deputy Governor Sharon Kozicki said the central bank is relying increasingly on non-traditional data and conversations with Canadians to understand how trade uncertainty and elevated interest rates are affecting households and businesses.

These insights, she said, helped shape the Bank’s decision to hold its policy rate at 2.75% this week.

“Most businesses expect activity to weaken in the near term, which puts jobs at risk,” she said. “Firms spoke about their costs increasing, which likely means they will need to raise prices at some point.”

While many mortgage holders are hoping for more rate relief soon, Kozicki’s remarks suggest a little more patience will be required before we see additional cuts.

“The Bank’s monetary policy actions restored price stability, and we have been able to lower our policy interest rate by 2.25 percentage points since last spring,” she said. “Canadians once again face greater uncertainty about what the future will hold. It’s important that people continue trusting us to be a steady hand in these turbulent times.”

Insights beyond the data

Kozicki noted that even with traditional data from Statistics Canada showing a softening economy, more granular feedback from the Bank’s outreach and surveys is proving critical. “These surveys help us gather a wide range of views on how current economic conditions are playing out in communities across Canada,” she said.

Among the more immediate challenges facing households is housing affordability, an issue that has emerged frequently during the Bank’s community visits.

“When I met with representatives from Ottawa’s information technology sector, I heard that the high cost of housing is making it difficult for firms to attract new employees from out of town,” Kozicki said. “Affordability also came up in my conversations with people working in the social services sector. They spoke about seeing increases in the number of people using food banks and experiencing homelessness.”

The Bank is also hearing concerns about rising mortgage payments and hesitancy to make big purchases. According to the Bank’s Canadian Survey of Consumer Expectations, released earlier this year, Canadians affected by the trade conflict and working in export-reliant sectors are feeling less secure in their jobs and are pulling back on spending.

“They say they’re more likely to reduce spending on durables—such as furniture and appliances—and on non-essentials like restaurant meals and vacations,” Kozicki added.

What this means for mortgage rates

Even with headline inflation easing, consumer expectations for future inflation have edged higher. “With all the talk about tariffs, consumers’ inflation expectations over the next year or two have recently increased,” Kozicki noted, pointing to persistent uncertainty as a key factor keeping those expectations elevated.

That expectation, combined with persistent cost pressures reported by businesses, could keep the Bank cautious on future cuts, and by extension delay further mortgage rate relief.

Markets are now pricing in roughly 75% odds of a Bank of Canada rate cut at its next policy meeting on July 30, but that decision will depend heavily on key economic data released over the next two months.

Meanwhile, fixed mortgage rates have climbed in recent weeks as bond yields moved higher, reflecting market unease over inflation and trade tensions.

Photo by Horacio Villalobos Corbis/Corbis via Getty Images

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Last modified: June 5, 2025