Deputy Governor, Bank of Canada
Pickle Planet - Sharon Kozicki - Bank of Canada
Bank of Canada Deputy Governor Sharon Kozicki joins Jenna & Tosh to discuss explaining inflation, understanding what we can ...
About Sharon Kozicki
Sharon Kozicki, Deputy Governor of the Bank of Canada, has continued to emphasize the importance of direct engagement with Canadians to inform monetary policy decisions. In a July 2025 speech before the C.D. Howe Institute, she stated that when Governing Council is better informed, it makes better decisions for Canadians. She noted that as the bank navigates uncertainty, she and her colleagues will continue reaching out to those they serve. In earlier remarks, Kozicki described the bank's use of quantitative easing (QE) during the pandemic as a tool with a "very high bar" that would not be used before exhausting the overnight interest rate, adding that the current balance sheet is estimated to be about the right size after the quantitative tightening cycle. Kozicki has also highlighted the value of non-traditional data and direct conversations to supplement traditional economic statistics. During a visit to Ottawa in late 2024, she said that while data is about the past, talking to people provides a better sense of how things are changing and what the future might look like. She has discussed the bank's role in explaining inflation and monetary policy to the public, stating that the bank has one tool—the policy interest rate—and that it is challenging to stimulate demand while reducing price pressures caused by supply-side shocks such as tariffs. Kozicki has also noted that interest rates alone cannot solve Canada's shortage of entry-level affordable housing.
Transcript (22 segments)
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Taylor and Jenna Morton0:11
I'm Taylor and I'm Jenna Morton, and this episode is going to be a fantastic discussion. Please don't get turned off by the dry nature of what it sounds like it's going to be, because I think you're going to love this discussion. Today with us in the studio we have one of the Deputy Governors of the Bank of Canada, Sharon Kozicki. Welcome to the show.
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Sharon Kozicki0:32
Thank you so much for having me. It's a pleasure to be here.
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Taylor and Jenna Morton0:36
I am thrilled to have this conversation because I have children in my house who are 12 and 13 and are asking me questions about inflation and finance, and I'm like I don't know. There are misconceptions about what you do.
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Sharon Kozicki1:14
I'll talk a little bit about what the bank does, and then we can go into inflation, because that's what I'm focusing a lot of time on in my job. The bank does a lot more than people realize. One of the things we're responsible for is we arrange for the printing of cash. So we're the ones that arrange for this cool currency, and we want to make sure that this is not easily copied or counterfeited. That's why in recent years you've started noticing the little window. I love when you move it, you can see the little holograph of the Queen's face. And so all sorts of things to make it really difficult to counterfeit. So that's one of the things we do. We even have people doing research to keep ahead of the counterfeiters. The windows are really effective. Another thing that we do is we supervise retail payments. You go to the store, you pay with your $20, the store owner takes it, they got the money, you've got your product, everything's done. What happens if you pay with a credit card or something on your phone? The money doesn't immediately get into the hands of the retailer. They've got practices in place so that when you tap, that money will get to the store and get credited to the right place, the right amount going to the right place. That's another thing we do. And then we do other things as well, but one of the big things I'm involved in is monetary policy. Monetary policy is about trying to keep inflation low, stable, and predictable, around 2%.
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Taylor and Jenna Morton3:41
What's inflation? Let's see if it's what I've told my children. Everybody understands prices. You go into a store, you see a price. Everyone understands when prices increase: you go into the store, what you paid $10 for yesterday is now like $12.
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Sharon Kozicki4:10
Inflation is about what's going on in the price of all of this complicated stuff. Statistics Canada has ways of looking at the prices of all these individual goods, figuring out how to weight them so you can get a broader measure of prices overall, and then how much that changes is inflation. When you hear me talk about numbers like 2%, that's over a one-year period. Just to give you an idea of how complicated it is, imagine your kid decides to go to a movie. There's the movie ticket, maybe popcorn, candy, a soft drink, all of those things have different price movements. That's what inflation is: it's a broad-based measure of how much more you need to spend this year than you did last year to buy the exact same stuff. But it's not even just for one person. We're trying to get it for the average person in the whole economy, straight across the country. That's huge. It does mean that at times people are like, 'Wait, you're telling me it's 2%, but it seems like I've been spending more than 2% more.' Other people might say, 'Whoa, this has been a good year.' It can depend a little bit on average over time. A lot of those things end up evening out, but at any one point in time, people might have very different experiences.
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Taylor and Jenna Morton5:55
That leads to some of the things we're hearing right now. When people see that we target inflation, which is how much prices change from one year to the next, we don't go back and try to fix past misses. The price levels are a lot higher now than they were five years ago, not just 2% each year, but a lot higher. So the price level is higher; we don't go through and try to bring it back down because that can be really costly. We're always looking to get the current and the future under control. But it does mean people see higher prices, and there is confusion between 'prices are high' and 'inflation is low.' That is a challenge because we're trying to make sure prices don't continue on that trajectory.
How exactly do you do that? The Bank of Canada is not an organization that sets prices. Retailers still set prices.
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Sharon Kozicki8:11
Our audience will say, 'Well, isn't there one interest rate?' There are tons of different interest rates. The amount you pay to borrow money to buy a car might be different than the interest rate you have to pay to buy a house. Even if you're buying a house, some people take interest rates that vary over time, other people want to lock in. So there are a lot of different interest rates. We control one, but that one feeds through and affects others. The idea is: when interest rates are higher, it costs more to borrow money. Maybe it's not as good a time to make a big purchase like a car or to not pay off your credit card if your interest rates move with that. You have more money to spend in the future. All of those things mean when we raise our interest rate, it costs a little more on the bank side, they raise their interest rates, it all sifts through. People want to save more and spend less. When people want to spend less, businesses find it harder to raise prices because they need to attract customers. So you tend to see price pressures come down. Interest straight up slows the economy, which means spending less, and then pressures on inflation are not as high, so inflation tends to be softer.
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Taylor and Jenna Morton10:12
Can you talk about children's future in terms of what they're going to be able to afford, especially big ticket items like houses and cars? What can you say to people who are worried about that?
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Sharon Kozicki10:29
Right now shelter costs have gone up a lot. In some environments, brand new rents on new places aren't really going up, but there's still a lot of catch-up going on. That's a challenge. But when people are looking forward, starting small, building up equity by paying down debt on the house, and maybe the house price goes up a little, then selling that house and buying something bigger can help people get into their dream home over time. But it is really expensive for houses right now. The cost of a house compared to income is really high compared to history. Interest rates are a little lower now. I'm old enough to remember when interest rates were above 4%, above 5%, even. In the 70s, we were talking above 15%. Why does that matter? Because when you're paying that monthly check on the house, how much interest you're paying matters a lot. With a lower interest rate, even if it's not as low as in 2019-2021, you're still paying less on interest, which means you can afford a higher house price for the same mortgage payment. It doesn't mean it's easy. The hope is, and you hear this a lot from politicians, to find ways to build more affordable housing. We have a shortage of affordable housing, good entry-level options, and then people can start that process.
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Taylor and Jenna Morton13:12
It must be a cycle. Our parents probably thought the same thing: how are my children ever going to get out of my house? They're going to be here forever. I think the cycle continues. I understand as an adult with my own children, I think the same thing: how am I going to be able to afford college for them, their first cars? It comes back to teaching children the value of money, starting young and learning how to manage money. Sometimes it's simple things: grandma gives a child $100, and the child is told you're allowed to spend $90, $10 goes into savings. That practice of putting some away, even if that money gets spent later, teaches that if you really want something, you put aside a little money along the way until you have enough to purchase it. It's also about understanding choices, not just getting everything. What do you really need? And if you have some left over, what do you want? Keep some of those wants in check because needs matter most over time.
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Sharon Kozicki16:12
It's also about credit cards. Teaching people how to use credit cards. The minimum every amount you don't pay gets interest put on it, and then you have to pay even more. So that initial thing you bought becomes more and more expensive. Credit cards are not saying don't use them, but pay off that balance every month. Avoid getting into a situation where you're having problems. Always pay it off. Those are good ideas: teach kids early to try to save a little, save up for special purchases, and understand that borrowing means you're paying more than the initial price because you have to pay the credit card company or whoever gave you that option. You're having to pay for that.
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Taylor and Jenna Morton17:30
One of the greatest things we can do as parents is have these conversations openly. There was so much taboo around talking about money. It doesn't mean you have to let your kids know how much is in every bank account, but you can have these conversations and talk about how a credit card works. For example, I take my kids shopping, give them a set amount of money, and say I'll pay the sales tax. That makes them decide what they want because they can't get everything. That sort of idea of making people understand choices is a good habit to think about. It becomes automatic. In this digital age, people see so many things, it's harder to understand that everyone makes choices because you don't see the process behind it.
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Sharon Kozicki20:46
On that point, even going back to the credit card, I said pay it off every month. It's tap, it's easy, you can get benefits, but it's also easy to forget how much you've tapped within a month. So try to find a way to keep track. You can do without that coffee and lunch later in the week. It becomes more automatic, but you have to build up that habit. Things that help build those smart habits early really help.
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Taylor and Jenna Morton21:24
We're talking about building these habits early for kids, but many adults missed them too. That's why we go into the second half of our lives not understanding what inflation truly means, or what tariffs mean. We assume 'up' is bad and it's the bank's fault. But we need to truly understand so that keyboard warriors don't say it's the Bank of Canada's fault that they can't have a house. It's often that people haven't had the time to learn what these things mean and how it can better their lives.
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Sharon Kozicki22:34
I'll give you another example useful for people going to university or college. I worked in the United States for a while. All universities are more expensive down there than up here, so it's a bigger barrier. I knew two people with student loans. One was very cautious about what needed to be borrowed, really tried to get that debt behind him, saving and scrimping to pay it down. The other was in an even more expensive program with a higher expected salary. Everybody had borrowed. But I observed people borrowing money and then renting wonderful furniture instead of secondhand stuff. They were living much more comfortably through the whole experience, and while they had a good salary at the end, it wasn't enough to pay off that loan in a year or two. The program was more expensive, so not exactly comparable, but the behavior was really different. It's not that borrowing money, especially when you're investing in yourself, is necessarily bad, but there is a payback. Finding ways to do things in a balanced approach and not going whole hog because someone is willing to lend you the money is important. They're willing to do that for a reason.
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Taylor and Jenna Morton25:10
For people who want to learn more about what the Bank of Canada does, how can they find more information?
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Sharon Kozicki25:14
We have a website with all sorts of information. Some of it is a little boring and dry, but we also have little videos designed to explain these complicated concepts in easier ways. So there's a lot of really valuable information. The website's a really tricky name: www.bankofcanada.ca.
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Taylor and Jenna Morton25:38
Beautiful. Sharon, thank you so much for being here today.
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Sharon Kozicki25:41
Thank you very much for having me.
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Taylor and Jenna Morton25:44
Thank you all for watching and listening. We'll be back next week with a new show.