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Quarterly Financial Report - Second Quarter 2024 - For the period ended June 30, 2024, unaudited

This is an account of the deliberations of the Bank of Canada’s Governing Council leading to the monetary policy decision on July 24, 2024.

The Market Participants Survey results are based on questionnaire responses from about 30 financial market participants.

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. Inflation returns sustainably to the 2% target in the second half of 2025.

Interactive web-based sample
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.

Weather, energy prices, and labour and import costs all contribute to higher grocery prices

Labour force participation tells us how many people are active in the labour market and how many have dropped out of it. It is just one piece of a larger puzzle, but it is essential to understanding what is happening in the labour market overall.

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.