As expected, the Bank of Canada raised the interest rate again on July 12, bringing it to 5%.
When was the last time we saw a 5% interest rate?
April 2001, that was 22 years ago.
So when can we expect to see that 2% inflation target?
The bank is pushing out its timeline for getting inflation under control.
Now, it is expecting inflation to remain at about 3% in 2024 before declining to the 2% target by the middle of 2025.
Do you know how many times the Bank of Canada raised the interest rate since March 2022?
10 times.
Yet, inflation is stubborn, the job market is hot and our economy is stronger than expected.
The bank wants the high interest rate to push things down.
But apparently, there is a super strong force working in the opposite direction, it pushes things back up.
What is this driving force?
On June 16, 2023, our country hit a major historic milestone.
Canada’s population surged to 40 million!
Well, it is a big number but it doesn’t mean much if we don’t have any context.
So I am going to tell you about the population trends both locally and globally, so you know what this 40 million milestone really means.
In 1929, Canada’s population was at 10 million.
It took 37 years to add 10 million more people to 20 million.
Then it took another 31 years to add another 10 million to 30 million people in 1997.
From 30 to 40 million people, it only took 26 years.
Ever since 1995, the main source of population growth in Canada has been immigration.
And 2015 was the first time we had more Canadians aged 65+ than under 15.
According to the latest statistics in 2022, the 65+ group is growing 6 times faster than the under 15 group.
Aging is definitely one of the major problems that our country is facing.
And our government is solving that with aggressive immigration targets.
Canada’s population is currently growing at a record setting pace in Canadian history.
How does that compare with other G7 countries?
The United States, United Kingdom, Japan, Italy, Germany and France.
Since 2016, Canada’s population has been growing at almost double the pace of other G7 countries.
Let’s zoom in and take a look at the population growth from 2022 to 2023.
In the US, the population increased by 0.47% from 2022 to 2023.
UK, 0.3%.
France, also 0.3%.
Japan actually saw a population decrease by 0.12%.
Italy, decreased by 0.3%.
Germany also saw a decrease, by 0.1%.
What about Canada?
Maybe double the pace of the US, so around 1%?
The correct answer is 2.73%.
You see, that’s what I meant by very aggressive immigration targets.
Let’s take a look at the population growth forecast from now to 2050.
The US is estimated to have a 9.82% population growth rate from now to 2050.
The UK, 5.47%.
France, 1.46%.
Japan, Italy and Germany are expected to see a shrinking population, with Japan seeing the biggest decline of roughly 15%.
Canada is forecasted to see another whopping number, more than 17% growth in our population.
Just a few days ago, our government has once again relaxed the requirements for HongKongers to become permanent residents.
They can now apply for permanent residency after working in Canada for one year.
Post secondary education will no longer be required.
You can see how determined our government is to attract newcomers to Canada.
Immigration is the strongest force going against the interest rate hikes.
On one hand, the government wants to discourage demand by increasing the interest rate.
On the other hand, all these newcomers are coming in to create new demands.
Which side is going to win?
Do we have the infrastructure to support this huge population growth?
Do we have enough housing supply?
What about doctors and hospitals?
If we cannot create enough supply to satisfy all these new demands, I’m afraid that we are going to see persistent inflation on a lot of things.
What do you think about the situation?
Comment below and let me know.
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