Central bank unlikely to be in a rush to bring rates higher after latest data
Canada’s labour market still has room to run before fuelling another inflation spike, leaving the Bank of Canada in no rush to raise rates again and giving mortgage professionals a longer runway to manage renewal shocks and borrower stress.
That was the message from CIBC Capital Markets that pushed back expectations for the next tightening move to mid‑2027.
Andrew Grantham, executive director and senior economist at CIBC Capital Markets said the jobless rate, “now sits a full percent higher than its pre‑pandemic level,” meaning investors betting on a 2026 hike are implicitly assuming “either a rapid improvement in that measure from here, or for the non‑inflationary (NAIRU) rate of unemployment to be persistently higher than it was pre‑pandemic.”
Grantham argued that there is “more room for non‑inflationary gains in employment ahead,” pointing to a Beveridge curve that appeared to be “moving back closer to pre‑pandemic norms” and to declining unemployment among newcomers as evidence of better job matching.
He also highlighted demographic shifts that could help push the NAIRU lower again, including an ageing population and a long‑running downtrend in short‑term unemployment, which left the proportion of workers unemployed for 1–4 weeks “much lower today than it was 15–20 years ago.”
“In reality, we will only really know where NAIRU lies when we see it — when broad wage inflation starts to accelerate again,” the report said.
For now, “business sector hourly compensation and unit labour costs” are running at levels that “should support a further easing in underlying inflation ahead.”
For lenders and brokers already managing a renewal wave that CIBC estimated would leave “an extended period in which labour market slack…will be in evidence,” the message is that the next shock to mortgage performance is more likely to come from employment instability than from a near‑term policy hike.
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