remarks by sharon kozicki deputy governor urban development institute of quebec december 8, 2022 montreal, quebec economic progress report : more transparency in uncertain times introduction good afternoon. thank you for inviting me to join you for this discussion. it ’ s always a pleasure to visit montreal. delivering an update on the state of the economy from one of our country ’ s most significant economic engines seems fitting. and the fact that we ’ re doing so today at the urban development institute of quebec ( udi ) seems particularly appropriate — especially when we consider how much the udi contributes to this thriving city. i ’ m here today to deliver an economic progress report. together with other initiatives that have been introduced over the years to increase the amount of information and analysis we provide canadians — especially around our interest rate decisions — speeches like today ’ s help clarify what the bank of canada does. i ’ ll begin where we often do with these economic progress reports — by going over yesterday ’ s rate decision and how we came to it. after that i ’ ll provide an update on what ’ s been happening in the economy since october ’ s monetary policy report, including trends that we ’ re keeping an eye on. finally, in the spirit of openness that this speech represents, i want to review some of the things the bank does to be accountable to canadians — the people we serve. this includes a new transparency initiative that we ’ ll be introducing this january. yesterday ’ s decision so, let ’ s dive right in. yesterday, the bank ’ s governing council decided to increase the policy interest rate by 50 basis points, to 4¼ %. our deliberations centred on the three areas we said we would be watching closely : how supply challenges are resolving, how higher interest rates are slowing demand, and how inflation and inflation expectations are evolving. i would like to thank mikael khan and daniel de munnik for their help in preparing this speech. not for publication before december 8, 2022 12 : 30 eastern time on supply challenges, while we continue to see signs of easing, progress is slow and could continue to be disrupted by geopolitical events. here in canada, we assessed the extent to which continued labour market tightness is serving as a key impediment to improving domestic supply, in both goods and services. with respect to the impact of our monetary policy actions, there is growing evidence that tighter monetary policy is restraining domestic demand. that said, growth in gross domestic product (

, the goods sector, such as autos, has experienced far more adjustment than services, such as retail. this appears to be largely a result of the export - oriented nature of the shock and the strength of the canadian dollar. these dynamics would be familiar here in windsor - essex, where the unemployment rate is about 3 percentage points above the national average. the bank expects that average hours worked will return to its trend, but only very gradually. those in involuntary part - time positions should eventually find full - time ones. this view is anchored by an expected slow recovery in goods sector employment, which in turn reflects our expectations for the pace of recoveries in u. s. demand and canadian business investment. if the u. s. falters or the acceleration in canadian business investment flags, then the pace of improvement in the labour market will be slower. household balance sheets and the outlook for consumption with canadians working, but not as much as they would like, they have been borrowing. real household credit expanded rapidly throughout the recession, in contrast to previous downturns, and has continued to grow through the recovery. canadian households have now r. harbour, “ automotive manufacturing transition, ” a presentation delivered at the center for automotive research, management briefing seminars, traverse city, michigan, 4 august 2010. found at : < http : / / mbs. cargroup. org / 2010 / content / view / 235 >. collectively run a net financial deficit for 37 consecutive quarters. that is, their investment in housing has outstripped their total savings for over nine straight years. in effect, households are demanding funds from the rest of the economy, rather than providing them, as had been the case through the 1960s, 1970s, 1980s and 1990s ( chart 10 ). this cannot continue. the ratio of canadian household debt to disposable income reached 146 per cent in the first quarter of this year, an all - time high and very close to the current level in the united states ( chart 11 ). in a series of analyses over the past year the bank has found that canadian households are increasingly vulnerable to an adverse shock and that this vulnerability is rising more quickly than had been previously anticipated. 4, 5 it is true that the strength of housing and other assets has meant that the net worth of canadians remains about six times their average disposable income compared with slightly below five times in the united states. however, while asset prices can rise or fall, debt endures. despite