ECB Watch: Shortcut

The U.S. Energy Information Administration reported on Thursday that U.S. natural-gas supplies in storage declined by 117 billion cubic feet for the week ended Dec. 1. On average, ...

Thank you for the warm welcome and thank you to the Windsor–Essex Regional Chamber of Commerce for having me today. It’s a real pleasure to be here. Yesterday the Bank of Canada announced that we will hold the policy interest rate at 5%. I will expand a bit on our discussion and the thinking behind our decision. Then I will dive into recent shifts in Canada’s population growth, focusing in on how newcomers contribute to our economy. Immigration is one of Canada’s greatest strengths. Our country is known as a welcoming place for newcomers. And Canadians are admired for how we help new arrivals succeed—both in our communities and in our workplaces.1 This is a reputation I feel that we should all aim to protect. Why? Because newcomers strengthen Canada’s labour force with their knowledge, skills and hard work. They play a crucial role in supporting the economy’s capacity to grow now and in the future. But there have been hiccups. Canada has long had housing supply challenges. The recent increase in newcomers has coincided with those material supply issues, raising questions about how chronic housing challenges might limit Canada’s future growth and what the implications are for inflation. These will be key elements of my speech today.What population growth means for the economy and inflation video We decided to hold the policy rate at 5%, largely because monetary policy has been working to cool the economy and relieve price pressures. But we are not yet where we want to be. Overall, the economy no longer seems to be in a state of excess demand, but we still need to see inflation come down further. We continue to keep an eye on inflation expectations, wage growth and the pricing behaviour of corporations to help us see if we are on a sustained path back to our 2% target. Canada has one of the fastest-growing populations among advanced economies, thanks largely to immigration. The number of permanent and non-permanent residents we’ve welcomed has risen sharply recently. This increase in newcomer arrivals is good for Canada, particularly given our aging population. Newcomers have added to our workforce and helped ease critical labour shortages. This has boosted Canada’s potential growth, which will help keep inflation lower in the future. Strong immigration since the start of 2022 has helped increase Canada’s workforce…. And the larger workforce has boosted the level of our potential output by 2% to 3% without adding to inflation. This is a significant improvement, especially considering Canada’s otherwise rapidly agin post: BoC's Gravelle: Economy Is Now Roughly In Balance But We Are Closely Watching Inflation Expectations, Wage Growth And Corporate Pricing Behaviour