Weak economy to prompt more policy support

The economy seems destined for a period of weak growth amid the US tariff shock and much lower immigration. We forecast average annual GDP growth of 1.0% next year, with a further rise in the unemployment rate – against a backdrop of near 2% inflation – prompting the Bank of Canada to cut its policy rate to 1.75%. Once the USMCA is renegotiated and looser policy feeds through, we expect GDP growth to accelerate to 1.8% in 2027.