As per the announcement on April 12, the Bank of Canada (BOC) keeps the interest rates unchanged at 4.5%.
It has been almost a full year since the interest rate was raised a number of times in the second half of 2022. But it remains at 4.5% as of January of this year.
Despite the fact that this rate is high, the fact that interest rates have not increased and the rate of inflation has decreased indicates that Canada’s economy may be stabilizing. Investing in GICs – (guaranteed investment certificates) at a constant rate makes it possible for newcomers to plan their spending and receive a predictable return. The governor of the Bank of Canada, Tiff Macklem, believes that higher interest rates are still possible. If the current monetary policy is not continued. Although it is too early to tell, it is too early to tell.
After measures are put in place, Macklem argues that the benefit of a higher interest rate might not be apparent for 18 to 24 months. Canadian prices remain high in part because of this.
Average Canadians are significantly affected by interest rates when buying a home or car. Although mortgage rates are likely to remain high for some time. The high-interest rate may cause concern even for those with renegotiable mortgage rates. Canadian federal legislation prohibiting non-Canadians and permanent residents from buying homes in Canada was amended recently, but the restriction still applies.
It makes budgeting and planning for future expenses easier for newcomers and Canadians at the moment because of a stable interest rate.
Immigration and tight labor markets
He told reporters that despite strong population growth, employers are finding it harder to recruit workers and that unemployment remains at 5%. The TFWP – (Temporary Foreign Worker Program) has played a large role in the expansion, according to him. This program helps recruit skilled workers and reduces job openings. Relieving the pressure on businesses struggling to meet demand by recruiting additional skilled workers.
Canada’s economy relies heavily on immigration due to the aging population, which leaves gaps in the labor market and contributes to vital services.
Approximately 500,000 permanent residents will be admitted every year by 2025, according to Canada’s Immigration Levels Plan 2023–2025. Health care, construction, and scientific and professional services will experience a reduction in the need to find qualified workers.
Macklem discussed immigration’s benefits for reducing inflation at a January 2017 news conference and said more immigration would rebalance the economy.
In order to control inflation, wages must slow down, which the Bank of Canada claims are essential. Because of this, we can handle immigrants more skillfully the more we hire them. The more immigrants are hired, the better we can control high wages. The BoC claims are essential for bringing inflation under control.
The Bank of Canada raises interest rates
The current high-interest rates are due to measures taken during the COVID-19 pandemic. Canadians were struggling financially at the time, and many businesses were closed. At that time, the Bank of Canada reduced interest rates to lessen the load.
As the economy recovered, spending grew, causing goods and services to become more in demand. Increasing prices and working harder led to higher inflation as businesses tried to keep up.
Spending is reduced when interest rates rise, which reduces demand. Consequently, pricing can be reduced by firms, which should lower living costs.
According to the Bureau of Statistics, inflation was at its highest in June 2022 at 8.1%. It was at 5.2% in February 2019. At the end of 2024, inflation will decline more gradually to the 2% objective. As the BoC predicts it will be around 3% in the middle of this year.