Toni Gravelle: Economic progress report - immigration, housing and the outlook for inflation

Remarks by Mr Toni Gravelle, Deputy Governor of the Bank of Canada, at the Windsor–Essex Regional Chamber of Commerce, Windsor, Ontario, 7 December 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

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.

First, let's turn to our decision.

Our decision to maintain our policy rate

Yesterday, Governing Council held the policy rate at 5%. This reflected our view that our monetary policy actions are working to cool the economy and relieve price pressures. We have made good progress on restoring price stability, but we are not there yet.

Let me explain what we are seeing.