High immigration rates will allow the BOC to rasie interest rates at a more moderate pace than markets expect, according to CIBC. The taming impact of new immigrants on wage inflation will work to provide the BOC with some flexibility in the pace of monetary tightening. After a pandemic lull, Canada welcomed more than 400k immigrants in 2021, and the government residents for citizenship.
As the labor market nears full employment, the additional pool of new workers is helping fill record job vacancies and possibly mute wage inflation. The CIBC is forecasting three rate hikes by the end of this year, likely beginning in April.
Household formation and its impact on housing demand could be understated due to the government's increasing use of permanent residents as a source of immigration.