CUSMA uncertainty to slow recovery, delay rate hikes

Uncertainty over CUSMA and lower immigration will slow the recovery, with average annual GDP growth a below-consensus 0.5% this year. A return to firmer growth of 1.7% in 2027 should see core price pressures strengthen which, paired with downward movement in the unemployment rate amid lower immigration, will prompt the Bank of Canada to return the policy rate to the midpoint of its 2.25% to 3.25% neutral range estimate. By 2028, we expect the federal government’s infrastructure drive to begin to bear fruit and immigration to rebound, helping to support stronger GDP growth of about 2%.