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Results from the Business Outlook Survey for the second quarter of 2023, along with those from the April, May and June 2023 Business Leaders’ Pulse surveys, suggest that capacity pressures remain elevated and expectations of significant price increases continue to be widespread. Firms anticipate that sales growth will begin to moderate from exceptionally high rates as signs of greater uncertainty emerge.

Inflation expectations for one to two years ahead have come down again but remain well above their levels from before the COVID-19 pandemic. The higher cost of living is the most pressing concern for consumers, and along with elevated interest rates, continues to constrain most households’ spending. Homeowners who are planning to renew their mortgage over the next two years and who expect significantly higher payments are likely to plan spending cuts. Some households though are starting to think the worst is behind them. Consumer confidence about the future of the economy has improved alongside their lower inflation expectations. Expected lower interest rates and strong immigration, which boosts housing demand, are behind consumers’ view that housing market will increase over the next year. Workers remain confident about jobs.

This is an account of the deliberations of the Bank of Canada’s Governing Council leading to the monetary policy decision on June 7, 2023.