Further rate hikes expected

Trump’s tax cuts — the two countries are the fastest growing in the G-7 — and allowing their monetary policies to remain in sync. Indeed, traders anticipate this united tightening will continue, pricing in roughly the same number of hikes from each central bank in 2019. Scotiabank expects the Bank of Canada will hike rates to 3 per cent by the first quarter of 2020, at which point it will have narrowed the gap between its policy rate and the Federal Reserve’s to just 25 basis points.

Stefane Marion, chief economist at National Bank of Canada, said it’s not just the sheer number of people entering Canada, but also the quality of immigrants the country has been able to attract: younger, more educated people who help drive household formation and contribute to the economy’s resiliency.

“We didn’t get fiscal stimulus on the same scale, but we’re still benefiting from the multiplier effect of the type of people we’re able to get from overseas.”

To be sure, the larger population may be no panacea in the Bank of Canada’s quest to return rates to a neutral stance of between 2.5 per cent and 3.5 per cent. And new immigrants can’t relieve the existing debt burden of Canadian households. “Canada is not at the same point in the credit cycle, tightening cycle, or housing cycle as the U.S., and the Bank of Canada isn’t going to be able to hike as much as the Fed,” said Frances Donald, head of macro strategy at Manulife Asset Management.

The acceleration of Canada’s population, though, will help to offset the impact of an aging workforce at a time when companies have been complaining about labour shortages.