A survey conducted by the Bank of Canada found that Canadians are increasingly cutting back on spending while mortgage holders remain confident in their ability to keep up with higher payments when renewing their loans.

The central bank released consumer forecasts for the fourth quarter and business outlook surveys on Monday, revealing how Canadians are performing amid rising borrowing costs and higher prices.

About two-thirds of consumers said they have reduced spending or plan to do so due to their expectations about interest rates and inflation.

The Bank of Canada also said that while many Canadians are experiencing increased financial pressures, this pressure is higher among those who typically live paycheck to paycheck.

The central bank stated that financially vulnerable households typically hold less than two weeks of expenses in liquid assets, often run out of money before the end of the month, and are unable to pay an unexpected $500 expense immediately.

The survey also found that one in four consumers reported having at least one of these characteristics.

While Canadians have become more pessimistic than the previous quarter about the economy, mortgage holders still expect to make their payments when their mortgage loans are renewed at higher rates.

For his part, Tiff Macklem said 2024 will be a transitional year for the economy, and it is still too early to think about lowering interest rates.

About 80 percent of mortgage holders said they are somewhat confident or very confident in their ability to make higher payments.

As for businesses, the central bank sees that weak demand and renewed competitive pressures have slowed the pace of price increases.

Canadians were paying more for everything as prices rose during the pandemic. But with inflation easing, prices will remain high, and some economists say this is a good thing.

While concerns about labor shortages have faded, companies expect wage growth to remain above average until 2025, which supports their inflation expectations.