The unemployment rate, at 5%, remains near its record low, and wages continue to grow in the 4% to 5% range. Employment growth has been surprisingly strong, reflecting continued demand and increases in labour supply. Past policy rate increases are working their way through the economy and restraining demand. Households are slowing their spending, particularly on big-ticket items.
As mortgages are renewed at higher rates, more households will feel the restraining effects of monetary policy. Taking these forces into consideration, we expect Canadian GDP growth to be weak for the rest of this year before beginning to pick up gradually in 2024 and through 2025. What does all of that mean for inflation?