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Macklem suddenly realizes that immigration adds to inflation

As expected, the Bank of Canada (BOC) raised its overnight rate by another 25 basis points, bringing the cost of borrowing to 5%. But the central bank governor has outlined a series of economic factors, including immigration, that may have disrupted the agency’s expectations into how long the heating inflation will last.

“We are trying to balance the risks of under and over tightening monetary policy,” he noted. “If we don’t do enough now we’ll likely have to do even more later.”

Macklem also identified rapid population growth as a factor contributing to the economic activity that’s pushing prices higher.

“Newcomers to Canada are entering the labor force, easing labor shortages. But at the same time, they add to consumer spending and demand for housing,” he said.

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