MNI: BOC Says Forecast Resilient To Lower Population Target

MNI (OTTAWA) - Governor Tiff Macklem said Friday the Bank of Canada’s economic projections appear intact after the government announced a sharp reduction of immigration targets that ministers said would help tame a housing squeeze.

“I wouldn’t overplay the difference between our assumptions and the various announcements by the government,” Macklem told reporters on a call-back from IMF meetings in Washington. Bank officials are "digesting" the details of the government's announcement Thursday that record population growth will slow or stall in the next few years, he said.

The Bank's projection that inflation will hold around its 2% target "isn't that affected by population growth" because the impacts are split between supply and demand, Macklem said. While a lower population would be expected to hit GDP growth, the Bank's rate cuts this year provide an offset to consumer demand, he said. 

Macklem also reiterated his view that the Bank is not near the limit of how far its policy rate can move below the Federal Reserve's equivalent, and that the divergence is reasonable because the two economies are on different paths right now. The Bank cut its key rate 50bps on Wednesday and said more cuts are justified if the economy evolves as expected. 

Asked about a think-tank paper this week suggesting the Bank was slow to raise and then lower interest rates through the pandemic disruptions, Macklem pointed to difficulties managing the most severe economic challenges since the Great Depression. "Clearly we didn’t get everything right," he said, noting the Bank will publish a review of its extraordinary policies early next year. (See: MNI: Bank Of Canada Is Lagging On Rate Cuts- CD Howe)