The Bank of Canada is keeping an eye on the federal cap on international student visas, particularly its potential effects on rental housing inflation.

This week, Ottawa announced a two-year cap on international student visas, which would see the number of new foreign students in the country cut by 35 per cent.

Bank of Canada Senior Deputy Governor Carolyn Rogers was asked Wednesday to comment on the policy move as it relates to housing market pressures.

In a Wednesday press conference following the central bank’s latest interest rate decision, Rogers said the bank is not in a position to comment on government policy. But she said they are observing the change and any potential effects it may have on inflation in the housing market, particularly for rental costs.

“What’s happened in the Canadian economy over the last year is we had a particularly big surge in population growth through immigration. It came at a time when there was constrained (housing) supply. You can see this very clearly, most clearly really in the housing sector, in particular in rents,” she told reporters.

“The policies that were announced are on their way to relieving some of that pressure,” she continued.

“We’ll see how they play out, but we will keep an eye on that. It’s definitely one of the things putting pressure on the housing components of inflation.”

Economist warns of consequences

According to the office of Immigration Minister Marc Miller, international education brings $22 billion to the Canadian economy and supports more than 200,000 jobs in Canada.

It’s for that reason that Randall Bartlett, senior director of Canadian economics at Desjardins, warns that any tweak to Canada’s temporary resident numbers, including students, could have harmful effects on the economy.

“There are going to be some consequences when it comes to overall economic activity generated by foreign students coming to Canada, as well as the negative consequences for post-secondary institutions in Canada who have backfilled a lack of financial support from governments with tuitions from foreign students,” he told BNNBloomberg.ca in a phone interview earlier this week.

The move has also ruffled some feathers at the education level.

Philip Landon, interim president and CEO of Universities Canada, said international students amount to as many as 25 per cent of students at some schools and most pay a significant premium to enroll in a Canadian institution, which has some schools worried.

“The potential for a significant financial blow to universities and colleges across the country is definitely there and we’re concerned about that,” he said.

With files from The Canadian Press