1. Canadian Inflation Lowers to 1.6% and an Interest Rate Cute to 3.75%
On Wednesday, October 23, 2024, the Bank of Canada made a 50 basis-point cut to its key interest rate, reducing it from 4.25% to 3.75%. This is the first rate cut of this magnitude since March 2020 during the pandemic, and differs from the smaller 25 basis point rate cut earlier in 2024 (Benchetrit, 2024). WithCanada’s inflation now back within the central bank's target range, currently at 1.6%, the focus has shifted to supporting economic growth (Al Mallees, 2024). The Bank of Canada has indicated that further rate cuts may be considered if the economy continues to align with their projections.
2. Canada's Immigration Cuts and What it Could Mean for the Economy
On Thursday, October 24, 2024, the Canadian Government announced a reduction in immigration targets, decreasing the number of permanent residents to 395,000 in 2025 and 380,000 in 2026, down from the485,000 targets for 2024. This shift marks a departure from over a decade of increasing immigration numbers and aims to address concerns such as declining job vacancies, rising unemployment, and housing affordability (Karim, 2024). In addition to adjusting permanent resident numbers, the government plans to reduce the temporary resident population, which includes international students and workers, to 5% by 2026. This reduction will involve a decrease of about445,000 temporary residents each year, which some economists see as a potentially excessive adjustment (Karim, 2024).
The economic implications of these changes have been a topic of debate among experts. Reduced immigration could slow economic growth, impact consumer spending, and decrease the availability of workers, raising concerns for some businesses. However, it may also help to alleviate pressure on the housing market, potentially slowing increases in rent and home prices (Karim, 2024). Additionally, the Bank of Canada has suggested that a focus on supporting economic growth through interest rate cuts could offset some of the impacts of reduced immigration. While there is uncertainty regarding how the reduced population growth might affect overall economic performance, some experts believe it could help achieve a more balanced and sustainable economic environment (Previl, 2024).
3. B.C.’s Political Uncertainty and its Potential Impact on B.C.’s Economy
The outcome of British Columbia's closely contested provincial election has raised concerns within the business community about potential economic implications. As absentee and mail-in ballots are still being counted, there is a possibility that the province could see an NDP minority government supported by the BC Green Party. This scenario has led to uncertainty among business leaders, who fear that the lack of a clear majority could hinder investment decisions and economic development. According to the Business Council of B.C., investment decisions amounting to between $80 billion and $100 billion are currently on hold, as businesses seek clarity and stability in government policy before proceeding (Little & McArthur, 2024).
In Canada, minority governments differ significantly from majority governments in their legislative approach. Unlike a majority government, which has more than half ofthe seats and can pass legislation with minimal opposition, a minority government must rely on the support of other parties to pass laws. This can lead to increased negotiation and compromise, with the governing party needing to adapt its priorities to secure the support of opposition parties (Parliament of Canada, n.d.). While this can result in more diverse legislative outcomes, it may also create delays in decision-making, potentially slowing economic projects in British Columbia. However, some observers believe that the need for compromise could moderate policies and create a more balanced approach to governance, which could stabilize the economy in the long term (Little &McArthur, 2024).
Financial Tip of the Month: Monitor Your Utility Bills as Winter Approaches
As temperatures drop, heating costs can quickly add up, leading to unexpected spikes in your utility bills. Start monitoring your energy usage now to avoid a shock when winter bills arrive.
At Alpen Investment Advisors, your trusted North Vancouver iA Investia team, we are committed to keeping our valued clients informed. We trust that you have found this market recap informative and insightful. Please do not hesitate to reach out to your dedicated financial advisor, jonathan@alpenia.ca for any questions about your portfolio or to help navigate the process of growing and preserving your wealth.
References:
Al Mallees, N. (2024, October 23). BOC delivers half percentage point rate cut, says it now must keep inflation at 2%.BNN Bloomberg. https://www.bnnbloomberg.ca/business/economics/2024/10/23/boc-delivers-half-percentage-point-rate-cut-says-it-now-must-keep-inflation-at-2/
Benchetrit, J. (2024, October 23). Bank ofCanada cuts key interest rate to 3.75%. CBC News . https://ici.radio-canada.ca/rci/en/news/2114453/bank-of-canada-cuts-key-interest-rate-to-3-75
Karim, N. (2024, October 24). Size of Ottawa’s cuts to immigration targets takes business by surprise. Financial Post. https://financialpost.com/news/economy/ottawa-immigration-target-cuts-surprise-businesses
Little, S., & McArthur, A. (2024, October22). “never great for business”: Economic worries amid B.C.’s politicaluncertainty. Global News. https://globalnews.ca/news/10822464/economic-worries-amid-bc-political-uncertainty/
Parliament of Canada. (n.d.). Majority and Minority Governments. https://learn.parl.ca/understanding-comprendre/en/how-parliament-works/majority-and-minority-governments/
Previl, S. (2024, October 25). Immigration has kept Canada’s economy afloat. what will coming cuts mean? . Global News. https://globalnews.ca/news/10830645/canada-immigration-cuts-economy-recession-chances/
