Booming population proves wild card in Bank of Canada rate decision StephHughes95
One of the reasons they opted to leave rates unchanged was their conclusion that the rapid run-up in population — the country added about one million new residents in 2022 — was probably making the labour market look stronger than it was in reality.
The Bank of Canada needs to understand what’s going on because the population will balloon even more if Canada reaches its target ofinto the country over the next three years. That would be good news for business owners who have been struggling for years to fill open positions, but it could also contribute to elevated price pressures if supply fails to keep up with demand.
“Governing Council members acknowledged that while this was helping to alleviate labour pressures, it added to demand as well as supply, given that newcomers to Canada are also consumers,” the summary said.Article content Policymakers concluded that the rush of new workers could be masking the effect of higher borrowing costs on household spending. They noted that a growing population pushed up overall consumption, but consumption on a per capita basis had been weakening. Macklem and his deputies agreed that consumer spending would fall in the latter half of the year and would remain subdued next year after a series of aggressive rate hikes.
“In this context, the strong hiring numbers in the Labour Force Survey in recent months were perhaps not surprising,” the summary said. “With faster population growth, employment growth could be stronger than the historical trend without adding to labour market tightness.”
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