The economy faces a prolonged period of weak growth as US tariffs and uncertainty over the future of the USMCA weigh on exports and investment. We forecast quarterly GDP growth at or below 1% annualised over the rest of the year. Canada’s retaliatory tariffs and the earlier depreciation of the loonie suggest that core inflation will remain high for the rest of this year. Although this will be a concern the Bank of Canada, we expect policymakers to prioritise supporting the economy and resume easing soon, taking the policy rate down to 2.25% by year-end.
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