In its MPR, the Bank explicitly ties the coming consumption slowdown to a sharp drop in population growth: “Population growth is a key factor behind this expected slowdown, driven by government policies designed to reduce the inflow of newcomers. Population growth is assumed to slow to average 0.5% over 2026 and 2027.” That’s down from 3.3% just a year ago. So what was driving GDP all this time? People. Not productivity. Not innovation. Not exports. People.
And now that the government has finally acknowledged the political backlash of dumping half a million new residents a year into an overstretched housing market, the so-called “growth” is vanishing. It wasn’t real. It was demographic window dressing. Macklem admitted as much during the press conference when he said: “If you’ve got fewer new consumers in the economy, you’re going to get less consumption growth.” That’s about as close as a central banker gets to saying: we were faking it.
And yet despite all of this, the Bank still clings to its bureaucratic playbook. When asked whether Canada is heading into a recession, Macklem hedged: “Our outlook has growth resuming… but we expect that growth to be very modest… We could get two negative quarters. That’s not our forecast, but we can’t rule it out.” Translation: It’s already here, but we’re not going to admit it until StatsCan confirms it six months late.
Worse still, when reporters pressed him on what could lift the economy out of the ditch, he passed the buck. “Monetary policy can’t undo the damage caused by tariffs. It can’t target the hard-hit sectors. It can’t find new markets for companies. It can’t reconfigure supply chains.” So what can it do? “Mitigate spillovers,” Macklem says. That’s central banker code for “stand back and pray.”
So where’s the recovery supposed to come from? The Bank pins its hopes on a moderate rebound in exports, a bit of resilience in household consumption, and “ongoing government spending.” There it is. More public sector lifelines. More debt. More Ottawa Band-Aids.
And looming behind all of this is the elephant in the room: U.S. trade policy. The Bank explicitly warns that the situation could worsen depending on the outcome of next year’s U.S. election. The MPR highlights that tariffs are already cutting into Canadian income, raising business costs, and eliminating entire trade-dependent sectors. Governor Macklem put it plainly: “Unless something else changes, our incomes will be lower than they otherwise would have been.”
