OTTAWA – Trade-sensitive businesses are telling the Bank of Canada that they’re broadly less worried about their “worst-case tariff scenarios” coming true compared to earlier in the year, a senior central bank official said Thursday.
Deputy governor Sharon Kozicki was speaking to the C.D. Howe Institute in Toronto a day after the Bank of Canada held its benchmark interest rate steady at 2.75 per cent.
Bank of Canada governor Tiff Macklem on Wednesday said ongoing high levels of uncertainty tied to the trade dispute with the United States are a big factor keeping the central bank on hold while it waits for more information on the looming economic and inflation impact.
Kozicki spoke about how the Bank of Canada is leaning more on non-traditional sources of data to make those decisions, including surveys of businesses and consumers.
Heading into Wednesday’s rate decisions, she said the central bank’s consultations with businesses in sectors particularly affected by trade were informative.
While those businesses still broadly expect economic activity to weaken in the months ahead, Kozicki said that, “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.”
The Bank of Canada started to lean on non-traditional data sources such as restaurant reservations and credit card transactions for more timely insights during the onset of the COVID-19 pandemic, Kozicki said, when backwards-looking retail data failed to capture the disruption.
In today’s situation, tracking more granular data such as the volume of trucks crossing the Canada-U.S. border can give monetary policymakers a nuanced look at how the tariffs are impacting imports and exports between the nations, she said.
“Today, in the face of a global trade conflict, we’ve continued to use – and even expand our reliance on – non-traditional data,” Kozicki said.
Heading into Bank of Canada’s March interest rate decision, which landed in the early days of tariffs before broad exemptions offered both clarity and confusion, she said the central bank “relied heavily” on survey data to inform its decision to cut the policy rate by a quarter point.
Kozicki said that while traditional macroeconomic data can paint a “high-level picture,” that could mean the central bank misses “how economic conditions are affecting different households and businesses.”
“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,” Kozicki said.
More recently, the Bank of Canada has foregone publishing a single, central forecast for the economy in its monetary policy report, instead providing two illustrative “scenarios” for how the tariff situation might unfold.
Macklem said Wednesday that he still expects the Bank of Canada will be less forward-looking than normal as it charts a path for monetary policy.
The central bank’s next interest rate decision and monetary policy report are due on July 30.
This report by The Canadian Press was first published June 5 2025.
