The imposition of US tariffs and risk of more to come will weigh on exports, consumer confidence and investment. As a result, we now forecast weaker economic growth, with GDP expanding by just 1.0% annualised on average over the next four quarters. For now, we forecast inflation to just about remain within the Bank of Canada’s 1% to 3% target range over the next year, but it will be a different story if the government implements retaliatory tariffs on a broader set of imports from the US. Given the weak outlook for the economy, we have revised down our forecast for the Bank’s terminal policy rate to 2.0%.
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