We expect that a sustained period of below potential growth will help bring core inflation to the 2% target by the end of the year and persuade the Bank of Canada to cut interest rates further, with the policy rate ending the year at 3.75% and settling at 2.5% next year. Lower interest rates should, in turn, drive a recovery in GDP growth from just 1.0% this year to 2.2% in 2025 and 2.8% in 2026.
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