CIBC deputy chief economist Benjamin Tal told attendees at the Canadian Mortgage Professionals National Conference in Ottawa that Canada is already in recession and the Bank of Canada must act quickly to lower interest rates.
“We’re in a recession,” Tarr said. “If this isn’t officially a recession, it’s certainly a per capita recession — especially if you live in Ontario and British Columbia… What’s happening now is the biggest test for your industry since the 1990s.”
He believes the current economic slowdown reflects a painful normalization after years of “abnormal” economic and housing conditions. “What we’re trying to do now,” he said, “is basically normalize the anomalies—make sense of things that don’t make sense.”
Trade tensions remain major risk
Tal said the “abnormal” times were largely defined by U.S. trade policy under President Donald Trump. He warned that tariffs “are here to stay,” calling them a hidden tax on consumers and a major source of inflationary pressures. “You basically have to mortgage your house to buy a cucumber,” he said.
While he expects the U.S. to eventually find a “manageable balance” in the trade relationship, Tal noted that damage to global supply chains will continue to weigh on economic growth and inflation. “Time is not on his side,” he said of Trump. “He will have to compromise, but the tariffs will remain in place.”
He estimated Canada’s current effective tariffs on the United States are about 8%, but that could rise to about 10% to 12% as existing trade deals are renegotiated. “It’s not going to be across the board,” Tarr said. “It’s going to be department by department — deep and narrow. Can we handle it? Absolutely.”
Inflation ‘no longer a problem’
Tal told attendees he believed inflation had fallen back to target and that monetary policy was now too tight for an economy that was clearly stalling. His comments came ahead of Tuesday’s inflation report, which showed prices rose more than expected, at an annualized rate of 2.4%.
“Inflation is no longer an issue, period,” he said. “It’s never, never, ever been about inflation. It’s always been about the cost of getting inflation down to 2%. If you measure it correctly, we’ve done that.”
He said the central bank has “given the green light” to cut interest rates and is expected to cut interest rates by 25 basis points at the next policy meeting, and may cut interest rates again in early 2026. “Our forecast is that they’re going to cut rates by 25 basis points, but I wouldn’t be surprised if by December or January they’re going to cut rates by another 25 basis points,” Tal said.
CIBC’s official forecast expects the Bank of Canada’s policy rate to fall to 2.25% and remain there until the end of 2026.
He added that the rate cut was needed to help households facing higher renewal costs. “If we don’t change rates, 10 percent of people will see their mortgage payments increase by 50 percent or more. That’s significant.”
Housing ‘frozen’ as affordability gap widens
Tarr described Canada’s housing market as “frozen — houses are too expensive to buy, but not expensive enough to build.” He warned that pre-construction activity has slowed sharply, particularly in Ontario and British Columbia, where the condo industry has been in recession.
“The low-rise market is doing OK, but not great,” he said. “The high-rise condo market is in recession… If you’re in the market for a condo, this is the time. It’s down 20 to 22 percent and it’s going to drop another 5 to 10 percent before the market clears.”
Fiscal policy can play a key role in “stimulating short-term demand to stimulate supply,” Tal said. He confirmed he has urged Ottawa to extend proposed GST/Harmonized Sales Tax relief beyond first-time homebuyers. “You want to make a difference in terms of affordability and do it for everyone,” he said. “If you do, do it. If you don’t, don’t do it. But don’t play games.”
Count people and make plans for them
Turning to immigration and housing supply, Tarr again warned that Statistics Canada was underestimating the country’s population by nearly a million due to modeling assumptions about visa expirations.
“When Statistics Canada said to CMHC and others that population growth next year was going to be zero, I said, ‘No, it’s going to be 1.5 per cent – because you’re overestimating how many people are leaving. They’re still here.'”
He said under-counting had led to councils planning too few growth plans, which “means we will be faced with this shortfall again and again”.
However, he sees the government’s recent decision to convert non-permanent residents already in Canada into permanent residents as a positive. “When someone comes from Canada, they have Canadian experience,” he said. “They’ve been working and studying in Canada, they speak the Canadian language, they know a little bit about the Canadian mentality, the connections are there, they have jobs.”
This group is contributing to the economy and housing market faster, he added. Because they are already established in Canada, they tend to earn higher incomes and buy homes faster—usually within two to three years, compared with the five to seven years it takes most newcomers.
forward rescue
Tarr ended his speech on a note of cautious optimism, saying he expected lower interest rates, federal spending and eventual stabilization of U.S. trade policy to boost the economy in 2026 and 2027.
“You’ve been through a very difficult time,” he told attendees. “This is the biggest test since 1991, but I believe we are very close to the bottom.”
He also said the housing market needed a short-term boost to “ignite demand and stimulate supply.”
Tarr recommended that the federal government expand the existing GST/HST rebate on new homes, which currently only applies to first-time homebuyers purchasing properties under $1 million.
“You want to make a difference in terms of affordability and do it for everyone,” he said. He added that if the government is worried about the fiscal impact, it should also consider what delaying action will cost the economy. “What are the costs of not doing this? The costs of not taking action,” he warned.
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Last modified: October 21, 2025
