Soft growth to keep Bank on pause in 2026

The labour market has bounced back from the US tariff shock, but uncertainty over CUSMA and lower immigration will hold back GDP growth, which we expect to average 1.2% in 2026 and 1.5% in 2027. Lower immigration will put downward pressure on the unemployment rate, but not by enough to present upside risks to wages or price inflation. With core inflation easing to 2% next year, we expect the Bank of Canada to keep interest rates on hold for longer than markets are pricing in.