2024 Was In like a Lion and Out like a Lion

2024 was a year to remember, both in terms of what happened and what may happen in 2025 as a result. As such, our final commentary of the year seemed a good time to provide a retrospective with a hint of things to come.

The year started under the pall of an affordability crisis External link.. Inflation was high but falling. Interest rates were high, albeit stable. But as Canadians renewed their mortgages at higher rates, inflation stayed more elevated than many people were comfortable with. The impending wall of mortgage renewals starting next year could add to these woes, squeezing household budgets and holding back consumption.

Rents were skyrocketing External link. too in 2024, in part because of generations-high population growth pushing demand way beyond supply. Unprecedented numbers of newcomers came to Canada, both permanent and non-permanent residents (NPRs). With affordability stretched, new arrivals took the lion’s share of the blame. To contend with souring public sentiment, the federal government planned External link. to reduce first NPRs and then permanent resident admissions as well. Those policy changes are just starting to bear fruit now, much to the chagrin of some business groups, as job vacancies remain stubbornly high in some industries.

With inflation slowing quickly early this year, and with growth set to slow External link. on weak population gains ahead, upward pressure on prices should ease further in 2025. Hence the Bank’s decision External link. to cut the policy rate by 50 basis points at its December meeting, following the same sized cut in October and three prior cuts of 25 basis points each. After starting the month of June at 5.00%, the policy rate ended 2024 at 3.25%—the top end of the range the Bank of Canada believes the policy will land in over the long term. And we expect it to fall further through 2025, reaching 2.25% by the end of the year.

Rounding out the big events impacting Canada in 2024 was the re-election of President Donald Trump and the Republican sweep of Congress. Throughout the election campaign, Trump touted tariffs as the solution to many of America’s problems, affectionately referring to himself as “Tariff Man.” And since the election, he has targeted Canada much more aggressively, escalating his threat of 10% across-the-board tariffs to 25% on Canada and Mexico specifically (although China could be hit even harder). If these more aggressive tariffs come to pass, our analysis External link. suggests the Canadian economy could tip into recession as early as next year.

To combat these threats, the Government of Canada announced External link. measures in its Fall Economic Statement 2024 to increase border security. However, this was overshadowed by the resignation of the Deputy Prime Minister and Finance Minister, Chrystia Freeland, and a deficit that ballooned to over $60B dollars last year. That has increased uncertainty considerably around the future direction of domestic and foreign policy, as the down-on-their-luck Liberals are facing the same anti-incumbency mood that returned Trump to the White House. It’s anyone’s guess what’s in store for the federal government in the new year. What’s more certain is that there is a fixed election date in October 2025.

But this anti-incumbent sentiment wasn’t just reserved for federal politics in 2024. Both the New Democratic Party in British Columbia and the Saskatchewan Party saw their majorities substantially reduced in their provincial legislatures. But they were both spared the fate of the New Brunswick Progressive Conservatives, who were shown the door as the provincial Liberal Party took the reins of a majority government. Bucking this trend were the Nova Scotia Progressive Conservatives, who returned to the provincial legislature with a larger majority. Speculation around an election in 2025 in Ontario suggests the same thing could happen there. While Quebec doesn’t have to worry about elections until 2026, the province is legally required to table a plan next year to eliminate its record $10.8B deficit over a five-year horizon. That alone could set the tone for the next elections, possibly making the economic resilience External link. of 2024 a distant memory.

All told, 2024 was in like a lion and out like a lion. 2025 could be even more ferocious.