BoC consults Canadians on monetary policy review, hears housing affordability concerns
The Bank of Canada has confirmed it will keep its 2% inflation target unchanged as it finalizes a renewed monetary policy framework agreement with the federal government, due before the end of 2026, even as the central bank's own consultation report shows persistent public frustration over the cost of living and housing affordability.
The report, summarizing feedback gathered from Canadians and stakeholders during consultations held in 11 cities and meetings with financial institutions, businesses, unions and consumer groups, found broad support for flexible inflation targeting.
Most participants concluded the bar to changing the target is very high, citing the risk of de-anchoring inflation expectations after the inflation spike that pushed the rate to 8.1% in 2022.
Affordability concerns dominate public feedback
Despite that support, many Canadians told the Bank the consumer price index does not match what they experience at the till, particularly for groceries, and that the disconnect has eroded trust in the data used to set interest rates.
Indigenous participants separately noted that standard inflation measures understate the price pressures they face, citing higher transportation costs tied to limited substitutes in their communities.
Housing dominated the conversation. Participants broadly blamed interest rates for unaffordability, though most accepted the Bank's influence over housing supply is limited once the full range of factors was explained.
Younger respondents were less convinced, with many telling the Bank they had given up on homeownership altogether.
Some economists who took part in the consultations argued for greater weight on rent inflation in the Bank's research, while others backed an acquisition-cost approach to measuring shelter costs, which they said would better reflect the experience of younger buyers.
That tension echoes earlier commentary from CIBC's deputy chief economist describing Canada's housing market as broken, where permits and new home sales have fallen sharply across Ontario and British Columbia.
Brokers eye predictability over further cuts
The framework feedback aligns with what brokers report hearing from clients day to day. Affordability stays exactly where it is with the recent BoC hold, a sentiment that mirrors the consultation finding that Canadians value predictability in rate decisions over aggressive moves in either direction.
That preference for stability has also shown up in recent data, with two in five brokers citing recession fear as the top deal killer this year.
Bank of Canada governor Tiff Macklem said the consultation exercise mattered because "it was important for the Bank to hear from Canadians as part of this process." The findings will now go to the Bank's Governing Council and the Department of Finance as both finalize the renewed agreement.
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