The near-term outlook for Canada is a little bleak. After a solid first quarter, we expect GDP growth to be muted as the imposition of US tariffs and risk of more to come weighs on exports, consumer spending and investment. Employment is likely to decline further and, despite much weaker immigration, the unemployment rate will rise to at least 7%. While the scrapping of the carbon tax has offset the pressure on the headline rate, measures of underlying inflation have recently increased. We expect the Bank of Canada to prioritise the weaker economic outlook by cutting its policy rate by a further 75bp to 2.0%.
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