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Differences in income, wealth and debt across households are important—for the economy, for the health of the financial system and for monetary policy.

Results from the Business Outlook Survey for the second quarter of 2022, along with those from the April, May and June 2022 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.

This survey took place between April 28 and May 13, 2022. Follow-up interviews took place in June. Consumers’ expectations for inflation have risen, alongside concerns about prices for food, gas and rent. Short-term expectations are at record-high levels. Long-term inflation expectations increased significantly in the second quarter of 2022, returning to the levels they were at before the COVID-19 pandemic. Most people believe the Bank of Canada can achieve its inflation target. However, some think the process of bringing inflation down will be difficult for the Bank of Canada. Expectations for higher inflation and rising interest rates weigh on consumer confidence. People expect that credit conditions will worsen and wage growth will not keep up with inflation. Flexible work arrangements could attract more people into the labour force.

The Canadian financial system remains resilient, but vulnerabilities have become more complex and risks have grown. The Bank is carefully watching households’ high levels of mortgage debt, as well as the risks associated with a price correction in Canada’s housing market.

This article presents the key results from the spring 2022 Bank of Canada Financial System Survey, conducted between February 22 and March 18. The survey included a special section on the potential risks associated with the global normalization of monetary policy.

Quarterly Financial Report - First Quarter 2022 - For the period ended March 31, 2022

The Annual Report outlines the Bank’s activities and achievements in 2021. It includes the financial statements and a message from Governor Tiff Macklem.

Canadian economic activity remains strong, and employment is robust. The Bank is forecasting growth of about 4¼% in 2022, easing to 3¼% in 2023.

In the first-quarter 2022 Business Outlook Survey, reports of labour-related capacity constraints and supply chain challenges remain widespread. Given these pressures and robust demand, businesses anticipate stronger price growth—and they expect the Russian invasion of Ukraine to add more cost pressures. As public health restrictions ease, firms that were hit hard during the pandemic anticipate their sales will pick up.

This survey took place in mid-February 2022 before Russia invaded Ukraine on February 24, 2022. Follow-up interviews took place in March and provide some insight into how consumers perceive the effects of the conflict. Short-term inflation expectations have reached record-high levels because of supply disruptions and the COVID 19 pandemic. Consumers think the Russian invasion of Ukraine will make high inflation worse. Despite greater concerns about inflation today, longer-term expectations have remained stable and are below pre-pandemic levels. This suggests that long-term inflation expectations remain well anchored and that survey respondents believe the current rise in inflation will not last. Although workers anticipate significant price increases in the near term, they believe their wages will increase only modestly. This is a source of dissatisfaction for them. Despite expecting higher interest rates, consumers continue to anticipate strong spending growth on a broad range of goods and services.