Bank of Canada says it will have a tough job tackling structural changes

The sun reflects off the Bank of Canada building in Ottawa. THE CANADIAN PRESS/Adrian Wyld

The Bank of Canada on Thursday predicted it would have “a tough job” tackling the structural changes that it said were set to permanently alter the country’s economic landscape.

Senior deputy governor Carolyn Rogers also said the next five years could be as economically tumultuous as the last five.

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Increased trade protectionism by the United States, Canada’s aggressive immigration controls and the adoption of artificial intelligence are here to stay, she said in a speech in Manitoba.

“When faced with a structural change ... we have to adapt. We have to adjust our thinking, our forecasting and our decisions to the new reality,” she said.

“My colleagues and I at the Bank are steeling ourselves for a tough job ahead.”

The uncertainty fueled by U.S. trade policy is hurting business investment and that will lead to fewer jobs and anemic productivity, she said. The BoC says U.S. tariffs on key Canadian imports could permanently cut growth.

A drastic reduction in the number of people coming into Canada could also hit growth, Rogers said, adding it would take time for the economy to adjust to lower immigration levels.

Economists say immigration controls could reduce demand for goods and services, which could be good for alleviating housing pressures but could hurt companies.

Rogers also cited the potential for AI to unleash productivity gains while acknowledging growing anxiety about the chances of disruption.

“Canadians have faced a lot of economic upheaval over the past five years, and the next five may not be much calmer. Our economy is still facing shocks,” she said.

The central bank and the finance ministry jointly review the two per cent inflation target every five years, with the next session set for this year.

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Rogers repeated the BoC’s stance that the monetary policy framework does not have to change but said the central bank would have to change how it implements it.

Given the choppier environment, the BoC is trying to better detect and assess supply shocks, incorporate more real-time data and be prepared to offer scenario analysis instead of a single baseline forecast for the economy, she said.

((Reuters Ottawa bureau))