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Posthaste: Immigration will allow Bank of Canada to cut rates sooner than 'peers'


Good morning!

A record flow of immigration could allow the Bank of Canada to start cutting interest rates before its “peers,” according to a report from Capital Economics.

“The longer-term effects of strong immigration do at least support our view that the bank will be able to reduce interest rates sooner than many of its peers, as wage growth drops back quicker than elsewhere,” Capital Economics economist Stephen Brown said in a note.

Immigration to Canada has been on a tear after falling off a cliff during the pandemic, with 269,305 international migrants arriving in the second quarter, the highest level since the start of record-keeping, according to Statistics Canada data released last week. Immigration accounted for 95.4 per cent of the country’s population growth in the quarter.

Justin Trudeau’s government earlier this year unveiled a plan to add more than 431,000 permanent residents in 2022, 447,000 in 2023 and 451,000 in 2024.

Immigration has been one of the main drivers of Canada’s economy, accounting for almost all the nation’s employment growth. But with job vacancies soaring to almost one million open positions in the second quarter and baby boomers retiring en masse, “high levels of immigration will be even more critical to the labour market,” Statistics Canada said.

Brown is thinking along those same lines, but regarding how that will interact with interest rates.

The Bank of Canada has raised rates five times since March to 3.25 per cent, from 0.25 per cent, to battle decades-high inflation. The cost of living has shown signs of moderating, but Brown said, in an email elaborating on his note, that the central bank will have to keep hiking to address high job vacancy rates and rising wages.

“For most central banks, the only way to cool their labour market is to raise interest rates aggressively — and to keep interest rates elevated — until labour demand weakens,” he said in the email. “The Bank of Canada will, by contrast, get a helping hand from immigration, which will help to re-balance the labour market through the supply side.”

Brown added the data already hints at immigration working its way into the labour market, citing the most recent jobs report from Statistics Canada that showed an increase of 66,000 people in the labour force in August, which accounted for 0.3 percentage points of the change in the unemployment rate to 5.4 per cent from 4.9 per cent.

“The impact on wage growth will not be immediate, but we expect to see some moderation around the middle of next year, ultimately allowing the bank to start cutting interest rates again in the third quarter,” he said in his email.

In the short term, Brown expects immigration will likely put pressure on Canada’s housing market.

The real estate market has been put on its heels of late with sales and prices falling nationally. Higher rates have deterred prospective buyers, causing some to opt to rent instead.

Almost 20 per cent of Canadians who were poised to purchase a house this year have put that plan on the back burner, and almost one-third (29 per cent) of 18-34 year olds said they had “postponed” buying a home,” according to a new report by Royal LePage.

That, in turn, has created an acute shortage of rentals and a new affordability crisis.

“The accepted wisdom is that strong immigration reduces the pressure on the Bank of Canada to raise interest rates, as it will eventually help to ease labour shortages,” Brown said in his investor note. “But the immediate impact has been to boost rental growth at a time when the bank is chiefly concerned about inflation expectations, arguably putting more pressure on the bank to tighten, not less.

The average rent for all property types across Canada in August 2022 was $1,959 per month, a year-over-year increase of 11.1 per cent, according to a report by, and up 16.8 per cent from the market low of $1,676 in April 2021.

“Strong immigration will continue to put upward pressure on rents, but with rents already at record highs in some cities and economic growth set to slow sharply, rental price inflation is likely to slow in 2023. That in turn should feed through to lower CPI inflation,” Brown said in his email.


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A BUSINESS FRIEND NO MORE? Despite what some described as a “catastrophic” campaign, François Legault comfortably secured a second term as premier of Quebec winning a strong majority after Quebecers went to the polls on Monday. But, Montreal’s business community won’t take much comfort from the outcome. That’s because Legault, the co-founder of holiday carrier Transat A.T. Inc., declared in the waning days of the campaign that increasing immigration would be suicidal for Quebec and the survival of French. French or no French, Montreal’s businesses are suffering from an acute shortage of workers just like the rest of the country. Said the head of the province’s largest business lobby group: searching for employees is like “fishing in an empty lake.” Photo by Graham Hughes/The Canadian Press


  • The Real Estate Board of Greater Vancouver releases data for September

  • Newfoundland and Labrador Premier Andrew Furey; Elvis Loveless, N.L. minister of transportation and infrastructure; Andrew Parsons, N.L. minister of industry, energy and technology; and John Hogan, N.L. minister of justice and public safety, will be available to media to provide an update on recovery efforts in response to the impacts of hurricane Fiona

  • The Senate committee on national finance will hear from Karen Hogan, the auditor general of Canada, on reports published by her office relating to federal estimates generally and other financial matters

  • The Senate committee on transportation and communications will hear from Blue Ant Media, Netflix, the Motion Picture Association – Canada, and the Canadian Association of Film Distributors and Exporters on Bill C-11, An Act to amend the Broadcasting Act and to make related and consequential amendments to other Acts

  • NDP Leader Jagmeet Singh will speak about protecting workers’ pensions and ensuring the Employment Insurance program is there for Canadians when they need it

  • Jerry V. DeMarco, commissioner of the environment and sustainable development, will hold a news conference following the tabling of his 2022 fall reports in the House of Commons

  • The special committee on the Canada-People’s Republic of China Relationship meets

  • The Toronto Regional Real Estate Board will host a fireside chat with Toronto Mayor John Tory. The discussion will focus on various municipal matters, including housing affordability and supply, transit and transportation, home energy rating and disclosure program, and taxation issues

  • Trial continues for Maxime Bernier, who leads the People’s Party of Canada, and others who are challenging COVID-19 tickets, saying it violates their Charter of Rights and Freedoms

  • Jonathan Wilkinson, minister of natural resources, will make a smart renewable energy funding announcement

  • The Calgary Chamber of Commerce will host Jonathan Wilkinson, minister of natural resources. Minister Wilkinson will speak to the government’s plans for a thriving and responsible natural resources sector for Canada now, and into the future. The minister’s remarks will be followed by a fireside chat with Deborah Yedlin, Calgary Chamber president and CEO

  • Today’s data: U.S. factory orders, U.S. job openings and labour turnover survey

  • Earnings: Novagold Resources Inc.





Housing in Canada has never been more unaffordable, according to the Royal Bank of Canada.

Higher interest rates imposed by the Bank of Canada this year have pushed the cost of home ownership to record levels compared to the median household income, RBC economists said in a report.

That means total ownership costs, including mortgage payments, now soak up 60 per cent of a typical household’s income, higher than the previous record of 57 per cent reached in April 1990.

Read the full story here.


Despite the challenges to consumers’ wallets, Canadians continue to spend on international travel with families in Canada and abroad eager to get back on planes as COVID-19 restrictions continue to ease. Our content partner MoneyWise explores how families can take to the skies but not break their bank accounts in the process. 


Today’s Posthaste was written by Gigi Suhanic (@gsuhanic), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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