Bank of Canada to review growth projections following Ottawa’s new immigration targets
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The Bank of Canada will review its projections for economic growth following the federal government’s announcement of new immigration targets that will cut the number of newcomers by 21 per cent next year.
“We’re digesting this, we’ll have a close look at it, and we will also look closely at the actual path we see in population growth and we will be revising as we gain more confidence in what exactly is going to happen,” said Bank of Canada governor Tiff Macklem, during a call with reporters on the sidelines of the annual meetings of the International Monetary Fund and the World Bank Group in Washington, D.C.
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The central bank released its forecast on Wednesday, where it announced a 50 basis-point cut to its policy rate. The bank also forecast a pick-up in household consumption and 2.1 per cent in gross domestic product (GDP) growth next year.
A day later, the federal government announced changes to its immigration targets for the next three years, reducing the number of newcomers by 21 per cent to 395,000 in 2025 and 380,000 in 2026. The target for 2024 was about 485,000.
“Obviously, if you have less population growth, you’re going to have less headline GDP growth,” said Macklem. “There is some risk to that, if population growth comes down faster than we’ve assumed, headline GDP growth will be lower than we assumed. On the other hand, if we’re about right with population growth and household spending recovers more quickly, it could be higher.”
While the central bank had worked a slowdown in population growth into its forecast for next year, the bank assumed average quarterly population growth of 1.5 per cent. Statistics Canada now estimates -0.2 per cent population growth over the next two years, in line with the federal government’s new targets.
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