as a result, higher energy and material costs are showing up in the prices of a growing list of goods and services. so even if there is some relief at the gas pumps, price pressures remain high and continue to broaden. in august, the prices of more than three - quarters of the goods and services that make up the cpi were rising faster than 3 % ( chart 4 ). chart 4 : inflationary pressures remain broad - based share of cpi components that are growing % above 3 % sources : statistics canada and bank of canada calculations above 5 % above 7 % last observation : august 2022 simply put, domestic inflationary pressures have yet to ease. that doesn ’ t mean higher interest rates are not working, but it will take time. by raising interest rates, we are making it more expensive for households and businesses to borrow and therefore to spend. in five steps since march, we have raised the overnight policy rate from 0. 25 % to 3. 25 % — one of the steepest and fastest tightening cycles we ’ ve ever conducted. and we are starting to see some effect. some interest - - 6rate - sensitive sectors of the economy have begun to cool. the housing market had overheated to unsustainable levels early in the pandemic due to low supply, increased demand for larger homes and low mortgage rates. with higher rates now constraining borrowing, the sector has cooled. but monetary policy takes time to work its way through the whole economy. households or businesses making a big purchase or investment — one that requires a loan — are feeling the impact. it takes longer for monetary policy to bring down price growth in other goods and services — especially services — because they aren ’ t directly tied to borrowing. instead, they adjust over time as overall spending moderates. what we ’ re watching in her september economic progress report, senior deputy governor carolyn rogers outlined what the bank is monitoring to guide our decisions in the months ahead. she explained that we will focus on how monetary policy is working to slow demand, how supply challenges are resolving, and, most importantly, how both inflation and inflation expectations are responding. i want to drill down on these latter two elements : measures of core, or underlying, inflation and measures of inflation expectations. these are critical guideposts for us as we seek to bring total cpi inflation all the way back to the 2 % target. core inflation as we look for a more fundamental turning point in inflation, measures of core inflation are

assess expectations of future inflation, and they show us that near - term expectations have risen. survey results also indicate that consumers and businesses are more uncertain about future inflation and more of them expect inflation to be higher for longer. so far, longer - term inflation expectations remain reasonably well anchored, but we are acutely aware that canadians will need to see inflation clearly coming down to sustain this confidence. this increased uncertainty heightens the risk that inflation expectations could become de - anchored. both households and businesses view inflation pressures as mostly global, but increasingly they are identifying domestic pressures — this is similar to our own view. results from our next consumer and business surveys, which we will release later this month, will be important for our assessment of how expectations have evolved. conclusion it ’ s time for me to conclude. low, stable and predictable inflation is fundamental to a well - functioning economy with sustained growth and shared prosperity. that ’ s why price stability is the main objective of monetary policy in canada. without price stability, nothing works well. high and unpredictable inflation creates uncertainty and unfairness, distorting decisions and undermining confidence in our economic system. it erodes the value of money. it distorts and confuses the information and incentives that consumers, entrepreneurs, savers and investors rely on to make their economic 3 see bank of canada, “ box 3 : scenario with a wage - price spiral, ” monetary policy report ( july 2022 ) : 25. - 9decisions. that means workers and businesses have less to show for their work, and it ’ s harder for everyone to plan for the future. plain and simple, high inflation feeds frustration and creates a sense of helplessness. we want an economy where households and businesses don ’ t have to guess where inflation is going to be. we want an economy where the money canadians earn from their hard work keeps its value. we want an economy where businesses have the confidence to invest. and we want an economy where workers make real wage gains underpinned by rising productivity. that is why we have taken forceful action to restore price stability. we have raised our policy interest rate by three percentage points this year in five steps, and we are reinforcing these increases with quantitative tightening. looking ahead, the governing council recognizes that it will take time for past interest rate increases to have their full effect on the economy and inflation. that ’ s why we ’ ll be carefully assessing the effects of our actions as we seek to slow spending