The expanding list of concerns for the Bank of Canada

The Bank of Canada has been attempting to thread a needle for months—that is, to slow the economy just enough to rein in inflation without going into recession.

The central bank provided ample proof that its method is effective in a report that was made public this week. Wages are increasing, the economy is growing again, and inflation has decreased.

However, the bank also has a list of potential roadblocks that might swiftly thwart that progress, including wildfires in Canada, population dynamics, foreign wars, and mortgage renewals.

The last two years have been devastating for Canadian consumers due to growing costs and higher borrowing rates. It’s simple to assume that better times are ahead when inflation starts to decline.

A wave of mortgage renewals about to smash into the economy is at the top of the bank’s list of dangers to economic development.

In its summary of deliberations, the Bank of Canada stated that “the large number of households renewing mortgages at higher rates and with higher payments in 2025 could curb spending and dampen economic activity and inflation more than expected.” The purpose of the summary is to provide Canadians with additional information about the Bank of Canada’s monetary policy decisions.

The central bank is concerned that lowering interest rates could cause the housing market to overheat at the same time. Pent-up demand across the nation has resulted from a weakening real estate market, according to economists.

The way the economy responds to population growth is another important issue.

Less than a year after reaching 40 million people last summer, new data this week indicates that Canada’s population exceeded 41 million in the first quarter of 2024. Statistics Canada claims that migration from overseas accounted for almost all of the rise.

The number of new Canadians keeps the economy growing. They purchase groceries, automobiles, and furniture.

However, months of GDP growth remained stagnant despite that increase. When GDP is calculated per person, the picture of the economy is noticeably worse.