Sharon Kozicki: Talking to Canadians - how real-world insights shape monetary policy
Central bank: boc | Type: speech | Date: 2025-06-05

Remarks by Sharon Kozicki Deputy Governor C.D.

Howe Institute June 5, 2025 Toronto, ON

## Talking to Canadians: How real-world insights shape monetary policy

## IntroductionThank you for the kind introduction, Bill.

And thank you for inviting me to speak before you today.It's always a pleasure

to be in Toronto.

This is where I did my undergraduate

and master's degrees, just north of here at the University of Toronto.

I have fond memories of spending

days in the Buttery-and occasional trips to the Brunswick House and the Duke of York.

But I digress.I really appreciate

the opportunity to deliver the annual Laidler Lecture in honour of David Laidler and his many contributions

to economic thinking.

He has left an indelible

mark on North American-and specifically, Canadian-monetary

policy.

This legacy includes writing two award-winning

books with Bill Robson.Speaking of which, I'm delighted

to be here at the C.D.

Howe Institute.

The Institute

has long been a resource for the Bank of Canada, thanks to its nationally

acclaimed writing about economic policy.

I've also enjoyed partnering with your organization

on workshops to debate

and research important economic issues.As you know, yesterday was one of the Bank's eight fixed interest rate announcement dates.

So my talk here is timely.In yesterday's decision, Governing Council maintained the policy interest rate at 2.75%.Here's the context in which we took this decision.The trade conflict initiated

by the United States remains the biggest headwind facing the economy.

Uncertainty remains high.The Canadian economy is softer, but not sharply weaker.And we've seen some firmness in recent inflation data.I would like to thank Sarah Miller, Joshua Slive and Lena Suchanek for their help in preparing this speech.These themes are broadly in line with what the Institute's

Monetary Policy Council mentioned last week when it called on the Bank to cut its policy interest rate by 25 basis points.In taking yesterday's decision, we of course looked at traditional

sources of data from Statistics Canada.

The agency's reports on issues

like inflation, jobs and housing

are critical to understanding

recent economic conditions.

But while those data give a good view of the forest-they're not necessarily providing as clear a sightline

to the trees.

We want to be able to see both.So today I want to discuss how we are discovering new insights

relevant to our policy-making.

This includes our use of non-traditional

data and surveys, as well as engaging

in important outreach activities with Canadians.In the book To Kill a Mockingbird ,

Atticus Finch says, 'You never really understand

a person until you consider things from [their] point of view.' This is true.

The conversations

my colleagues and I have with both individuals

and businesses

help us see beyond the data-and

consider their points of view.

## Expanding our information gatheringAs I said earlier, traditional

macroeconomic data paint a high-level picture.

They report on whole segments of the economy.

Sometimes that means we don't see how economic conditions

are affecting different households

and businesses.Not only that, but traditional

data tend to look backward-they measure what has already happened.

They work best at helping

us forecast and explain things we have previously experienced.The Bank's surveys and consultations

with Canadians

give us a snapshot

of their spending

and investment intentions.

We learn more about their expectations for inflation

and economic activity.

The results are crucial to our deliberations.When we expand the kinds of information we consider in our decisions,

we gain a more complete view of how raising

or lowering the policy rate affects consumers and businesses

across the country.Simply put, this broader range of information helps us make better decisions.Just as importantly, connecting with Canadians

helps build trust and credibility with those we serve.

When people

have trust in the Bank as an institution-and see that we have their best interests

top-of-mind-it creates an environment that supports

the effective transmission of monetary policy.This is because when Canadians

expect that we will follow through on our commitments, it greases

the wheels for our actions to have their intended effect.

And that, of course, is to achieve price stability,

which in the long term promotes the economic and financial welfare of our country and its citizens.

## Non-traditional sources of dataNow, I'd like to dive into some specific ways the Bank has broadened

its sources of information over the years.

I'll start with why we use some non-traditional sources of data.Our experiences during the COVID-19 pandemic provide a good example.Before the pandemic, we certainly didn't have data or models to grapple with a worldwide health crisis that would cost lives and livelihoods.

Then, in March 2020, economies around the world came to a grinding

halt.

Moreover, the situation

was evolving very quickly.Let's consider what was happening

with travel and dining out.

Demand for services like restaurants,

flights and hotels was the first to fall off.Statistics Canada produces monthly data on sales at bars and restaurants

that are helpful in normal times.

But at the start of the pandemic, the backwardlooking figures didn't reflect the rapidly deteriorating

situation.

So the Bank turned to more frequently published

data-such as restaurant reservations,

flight bookings and credit card transactions-to

assess

consumers' real-time spending patterns.Another useful source of non-traditional

data in the spring of 2020 were job postings

from websites like Indeed.

These data showed us the demand for new workers by firms across the country, nicely complementing data from Statistics Canada's

Labour Force Survey.

The Labour Force Survey told us what had happened

with employment in the previous month, while more real-time data gave us a glimpse of what businesses

expected for future hiring.And today, in the face of a global trade conflict, we've continued to use-and even expand our reliance on-non-traditional

data.

For instance, we are looking at different metrics to round out our analysis of tariff implications.

These include the number of trucks crossing the border, and the volume of ships entering

and leaving ports in both Canada and the United States.It will surprise

no one here to learn that the numbers aren't encouraging.

As one example, the number of trucks crossing the border both to and from the United States dropped sharply in April.This type of information is invaluable

in times of great economic uncertainty-like we're in today.

## Surveying CanadiansNow on to another important tool: surveys.Like other central banks, the Bank conducts a number of surveys with the financial sector. 1

The results provide us with information on important issues like lending

conditions as well as the demand for and supply of credit.

We also gain important insights

on risks and resiliency in the financial system.

And we talk to financial market professionals

to hear their views on where the economy and inflation

are headed.But today, in talking about surveys, I want to focus more on how our regional offices inform our monetary policy deliberations

by reaching out to households and businesses.1 For examples, see the Senior Loan Officer Survey, the Financial System Survey and the Market Participants Survey.Since the late 1990s, the Bank has been expanding its reach into the diverse regions that make up this great country.

This work has included opening

regional offices, and surveying businesses

and consumers about their economic views.

Our regional

staff are well positioned

to strengthen

our ties with key local stakeholders

such as industry, government, educational

institutions

and community organizations.Currently, the Bank's regional

offices conduct three key macroeconomic surveys: the Business

Outlook Survey, the Business

Leaders'

Pulse

and the Canadian Survey of Consumer Expectations. 2,

3, 4I'll go over each one in greater detail in a moment.

But overall, surveys like these accomplish three main goals.First, they help inform our outlooks for the economy and inflation.

We hear from individuals

and businesses

about how they're feeling-a measure of their current levels of confidence.

We also ask what they expect to happen

to prices and their own spending

in the future.This gives the Bank forward-looking views on economic activity, demand, capacity pressures

and inflation.

That makes surveys particularly helpful in providing early indications

of how the economy is reacting during times of great uncertainty, like the current trade conflict.Surveys also shine a light on trends that may be simmering beneath the surface.

They help us understand

behavioural

changes that don't always show up in aggregated

data reports-at

least not immediately.Finally, these surveys help us gather a wide range of views on how current economic conditions

are playing out in communities across Canada.Our national

economy is made up of diverse regional economies.

Economic conditions

may differ across regions,

and regions may respond differently to broad-based

upswings

and downturns. 5

Survey data give us a clearer view of the differences in how households

and businesses

are experiencing the economy.Let me now turn to each of the surveys.The Business

Outlook Survey-or BOS for short-is a quarterly survey of businesses

across the country.

It has existed since 1997, which provides us a rich, long dataset for comparisons.Staff in our regional offices meet with local business

leaders to discuss their views on the economy.

We ask about their expectations for sales and demand, as well as their investment intentions.

We probe their views about labour2 See the Bank's website for details about the Business Outlook Survey.3 For more, see T.

Chernis, C.

D'Souza, K.

MacLean, T.

Reader, J.

Slive and F.

Suvankulov, 'The Business Leaders' Pulse-An Online Business Survey,' Bank of Canada Discussion Paper No. 2022-14 (June 2022).4 See the Bank's website for details about the Canadian Survey of Consumer Expectations.5 For more, see D.

Amirault, M.

Verstraete and S.

Miller, 'Canada's regional economies,' The Economy, Plain and Simple (June 2023).shortages,

as well as hiring and wages.

And we ask for their outlooks on costs and pricing, as well as economy-wide inflation.

This gives us a broad range of perspectives about how businesses

view the economy.For example, the results of the BOS for the fourth quarter of 2021 helped us better understand

how the COVID-19 pandemic was affecting firms. 6

For the first time since the start of the pandemic, we saw that businesses

were planning

to pass along cost increases

stemming from supply chain pressures.

They had concluded that customers understood

these pressures

and were willing to accept price increases.More recently, firms told us that uncertainty about tariffs has been affecting them in multiple ways.

These impacts include weaker demand from their business customers that would be directly affected by tariffs.Now on to the Business

Leaders' Pulse, or BLP for short.

This is our newest survey, created in 2021.

It's a short monthly online

questionnaire

to assess

firms' expectations for growth in sales and employment.

It also asks about perceived risks to their business

outlook, and poses other topical questions.The BLP provides a flexible and nimble pulse of evolving situations.

It complements the BOS with timely feedback from firms about the effects of rapid changes in the economy.And the BLP has been very helpful in monitoring effects from the situation

south of the border.

For example, businesses

were reporting an increase in both uncertainty and inflation expectations as early as November 2024.

In December, we also began noting a decline in business

sentiment-even

before the new US administration

was sworn in.This downward trend continued

through the first quarter ( Chart 1 ).

Firms have reported that they are delaying or entirely cutting their plans to invest and hire.

Sales expectations among exporters have also fallen considerably

in recent months ( Chart 2 ).6

See Bank of Canada, Business Outlook Survey-Fourth Quarter of 2021 (January 2022).

## Chart 1: Business sentiment fell through the first quarterExcluding normal seasonal patterns, how would you rate current business conditions for your firm? (double-weighted balance of opinion*)* Percentage of firms reporting positive sentiment minus the percentage reporting negative sentiment.

Responses of very good business conditions and very poor business conditions are given twice the weight of responses of good business conditions and poor business conditions.

The range of potential outcomes of this double-weighted balance of opinion is -200% to 200%.Note: This question was not asked in September 2022.Source: Business Leaders’ PulseLast updated: May 31, 2025

## Chart 2: Sales expectations have softened, especially for exportersExpected sales growth next 12 months, relative to historical averageNote: The historical is taken from 2022 2025average January through MaySource: Business Leaders' PulseLast updated: May 31, 2025The final survey I'd like to highlight

is the Canadian

Survey of Consumer Expectations, or CSCE.

This is a quarterly survey that measures households' views about their job prospects and financial health, as well as their expectations for inflation.

We also ask about current issues

of interest to the Bank.

The results are parsed out by characteristics like age, geography, income and education.During and immediately after the pandemic, the CSCE was helpful in giving the Bank a clearer look at differences in spending

and saving patterns

across households.

When it came to individuals,

the pandemic-and subsequent increases in inflation and interest

rates-affected different segments of the population

very differently.

I spoke about this at the University of Regina in the autumn of 2023, a speech I encourage you to read. 7More recently, in the first quarter of 2025, results

from the CSCE highlighted

an emerging 'Buy Canadian' movement that could reduce Canadian imports from the United States.The CSCE has allowed us to see how trade tensions

with the United States are having a more pronounced

impact on some Canadians.

People working in sectors that rely on exports to the United States are increasingly concerned about their job security.

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.And tariff policies could impact the prices consumers face.

Indeed, with all the talk about tariffs, consumers' inflation expectations over the next year or two have recently increased

( Chart 3 ).

## Chart 3: Consumers' inflation expectations increased earlier this yearInflation expectations for each horizon: What do you expect the rate of inflation (deflation) to be? (Interpolated median)

## Special regional consultationsI'll turn now to consultations

that fall outside of the Bank's normal survey schedule, and that are driven largely by pressing

issues

of the day.For many years now, the Governor and other senior

Bank officials have met regularly with leaders in different sectors.

Most recently, members of Governing Council spoke with representatives

from the auto sector, as well as other manufacturers and exporters.

We wanted to hear first-hand how the trade conflict is affecting businesses

in these sectors today and their outlook for the future.The Bank is also holding

special consultations

across the country to supplement traditional

datasets

and our standard

surveys.As an example, I'll take you back to the interest

rate decision in March 2025.We were operating

in an environment that was truly chaotic.

Governing Council wanted to know more about how the economy was being affected by uncertainty around both US trade policy and Canadian

countermeasures.We relied heavily on the results

of our three standard

surveys to inform our interest rate decision.

And we supplemented

these results

with additional information from businesses

and industry associations

that were particularly affected by trade tensions.

This would not have been possible

without the strong relationships

our regional

staff have developed and nurtured over the years.We also considered

information coming in from such consultations

for our rate decision yesterday.

I'll give you a glimpse of what we heard.Overall, firms believed that their worst-case tariff scenarios were much less likely to materialize than they reported earlier this year.

While uncertainty remains high, there was less talk of catastrophic outcomes.

But firms have now started seeing concrete impacts on their performance, and they're finding it challenging

to formulate their outlooks.Most businesses

expect activity to weaken in the near-term, which puts jobs at risk.

In addition,

firms spoke about their costs increasing,

which likely means they will need to raise prices at some point.Governing Council considered this information with other data and analysis in deciding yesterday to keep our policy interest rate at 2.75%.

## Governing Council outreachFor my final example, I'd like to talk now about an initiative that is near and dear to my heart.Members of Governing Council have ramped up the number of regional visits we make to hear first-hand about local economic conditions

in communities across the country.

We're asking a lot of questions

and listening

to people's

views and experiences.Sometimes these regional

meetings take place when a member of Governing Council is in a community for a public speech.

Other times we will make a trip solely to meet with community members and local firms.Last year, my colleagues and I embarked on 16 community visits with a combined total of about 100 roundtables,

bilateral

meetings and consultations.

In addition

to businesses,

we met with a diverse range of individuals

and groups across the country, including Indigenous

Peoples, labour unions,

public officials, business

improvement associations

and organizations

that provide social services-to name just a few.While I'm in Toronto, I'll be meeting with representatives

from academia, a labour union and a shipping

and transportation

company.

I will also be speaking with the head of a mentorship program for tech start-ups

and a leader in biomedical engineering.People I've met with across the country have left an indelible

mark on my perspective as a member of the Bank's Governing Council.Hearing first-hand from people and businesses

gives me greater clarity of the depth and breadth of economic issues.

Speaking face-to-face with people turns facts and figures into a more complete narrative of how the economy is evolving.I've also heard things in my travels that foreshadowed

what appeared later in hard datasets.

For instance, when I was in Moncton earlier this year, firms told me that shipments

to the United States were happening

sooner than originally planned.

They also reported an uptick in bringing

shipments to Canada.

This pointed to exporters and importers pulling forward shipments

and building

up inventories

ahead of tariffs-which showed up later in official data.These insights

also help the Bank grasp the real-world issues

that stretch beyond traditional

data.

When I met with representatives

from Ottawa's information technology sector, I heard that the high cost of housing

is making it difficult forfirms to attract new employees from out of town.

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.Another benefit of doing outreach is that it allows you to connect the dots.

If I hear something

in the Fraser Valley and again here in Toronto, this may be a sign of an emerging national

trend that's worth keeping an eye on.But I want to stress that it's not just Governing Council members like me who are out collecting these insights.

Our regional staff make important connections with individuals

and businesses

every day.

They deserve huge kudos for their efforts in communities across the country.What we hear really does help us understand

how developments like pervasive trade uncertainty affect the economy.

So if the Bank asks your organization

to participate in a survey or an outreach activity, I encourage

you to do so.

We're grateful to those who are willing to take time out of their busy schedules

to meet with us.And lest I leave you with the impression

that the benefits are one-sided,

I certainly hope that those we meet with also come away from our conversations with a deeper understanding

of how the Bank of Canada is working for them.We know the last few years have been difficult.

Many households

and businesses

faced significant hardships

with inflation spiking higher than it had in decades.

The elevated interest rates that were needed to bring inflation back to the Bank's 2% target also made borrowing more expensive.In the end, 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.But 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.

Our outreach is an important part of earning-and

maintainingthis

trust.

## ConclusionIt's time for me to wrap up.Before I take your questions,

I want to note that this year marks the Bank's 90 th anniversary.

For nine decades, we have promoted the economic and financial well-being

of Canada and Canadians.We don't always get everything right, but we are constantly learning

and adapting.

This is vitally important in today's highly uncertain environment when the situation

sometimes feels like it's changing by the hour.As we navigate this uncertainty, my colleagues and I will continue reaching out to those we serve.

When Governing Council is better informed, we make better decisions-for you, and for all your fellow Canadians.Thank you for taking the time today to hear more about our work at the Bank of Canada, and how your insights

shape our thinking.I look forward to answering any questions

you may have.