The Role of the Bank of Canada and How It Impacts Newcomers to Canada

The Bank of Canada (BoC) has recently raised interest rates to 4.75%, marking the highest level since 2001. This increase is a part of a series of hikes that began in July 2022, when the rate was raised from 1.5% to 2.5%. Despite previous indications from BoC Governor Tiff Macklem that further increases would be avoided, the current hike comes as a surprise to many.

The BoC had expected that previous increases would reduce consumer spending to a point where the economy could slow and stabilize. However, unexpected increases in spending on interest-sensitive goods, including the housing market, have been observed. The labour market remains tight, and immigration and participation rates have expanded the supply of workers, who are being hired quickly. This means that there continues to be high demand on Canada’s economy.

The BoC has maintained a high interest rate in recent months to slow consumer spending and reduce the level of inflation, which currently stands at 4.4%. Theoretically, less spending means there is less demand for products and services. This means that businesses don’t need to work as hard to meet the needs of consumers and can (or need to) lower their prices.

The BoC was established as Canada’s central bank in 1934 and became a crown corporation in 1938. It is owned by the federal government but operates mostly independently. The Bank of Canada Act says the Bank’s purpose is to “regulate credit and currency in the best interests of the economic life of the nation.” It is responsible for setting interest rates and creating policies that will have a positive impact on Canada’s economy.

Higher interest rates mean it is more expensive to borrow money from Canada’s banks to make large purchases, such as a mortgage or a car. This can make it difficult for newcomers to Canada to purchase a home, often resulting in many newcomers renting their first homes instead of buying. However, renting can also be expensive. For example, the current average rental price of a one-bedroom apartment in Toronto is $2,425 per month.

Canada’s tight labour market is also creating demand for skilled newcomers. According to the Immigration Levels Plan, Canada will welcome 500,000 new permanent residents each year by 2025. This number is high in part because several employment sectors are dealing with a shortage of skilled workers. To help Canada reach its immigration targets while also filling these gaps, Immigration, Refugees, and Citizenship Canada (IRCC) is expected to begin holding new category-based selection draws later this summer for Express Entry candidates with work experience in specific high-demand occupations.

Ravi brings a wealth of knowledge and expertise in visa updates. With a keen eye for the latest trends and changes in visa regulations, Ravi ensures that our readers are always up-to-date with the most accurate and relevant information.

Leave a Comment

Facebook Twitter WhatsApp