The economy has mostly held up against US tariffs so far, thanks largely to resilient consumer spending. But exports have weakened, and investment is showing signs of slowing. With the upcoming USMCA renegotiation set to prolong trade uncertainty, both are likely to stay weak, keeping GDP growth below potential at 1.5% in 2025 and 1.2% in 2026. Concerns over underlying inflation have kept the Bank of Canada from adopting a more accommodative monetary policy stance, but we expect these to fade as goods inflation risks recede and economic slack cools services inflation. We forecast two further rate cuts in this cycle, bringing the policy rate to 2.25%.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services