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The federal government’s planned immigration cuts will slow population growth — the central driver of Canada’s recent economic growth — but those cuts don’t derail the outlook for the economy or monetary policy in the short term, says CIBC World Markets Inc.

In a new report, the bank’s economists evaluated the implications of the recent decision to curb immigration, saying that, while the new lower immigration targets “will have an impact, they are not [a] game changer … at least not in terms of the near-term trajectory for growth, inflation and interest rates.”

For one, the government’s efforts to reduce the share of temporary immigrants will be a more important determinant of the rate of population growth than the lower targets for permanent immigration, it said. And the government’s goals to reduce the share of temporary immigrants may prove harder to achieve than expected.

“[D]elays in people on existing work and study permits leaving the country, combined with a rise in asylum seekers as stricter measures on students and temporary workers have come into effect, suggest that this may be a difficult target to meet in … a short time frame,” it said.

“We continue to forecast a more gradual reduction in the proportion of non-permanent residents, which will mean we see some [albeit modest] population growth over the next few years,” the report said.

And even as population growth slows, there’s already slack in the economy, which suggests that “slower labour force growth shouldn’t be a headwind to efforts to accelerate GDP in 2025,” the report said.

The reduced immigration targets will lower potential growth for 2025 and 2026, but that reduction is just 0.3 percentage points per year, compared with previous forecasts, the report said.

“We still believe that the Bank of Canada should continue to cut interest rates quickly, and will ultimately need to take rates below neutral to reduce slack in the economy,” it said.

While the drop in immigration may lead to labour shortages by 2026, “there is time between now and then for whoever’s in government to reassess the situation and potentially reset targets,” it said.

For now, “lower immigration targets are not a game changer for the path of GDP growth and interest rates,” the report concluded.