BoC Governor Macklem's Opening Statement: forecast for economic growth and inflation in Canada has not changed significantly since our October projection; "current policy rate is appropriate based on our outlook"

POLICY

• "Council judges the current policy rate is appropriate based on our outlook", the consensus was that elevated uncertainty makes it difficult to predict the timing or direction of the next change in the policy rate.
• Monetary policy cannot compensate for the structural damage caused by tariffs, and it cannot target hard-hit sectors of the economy.

GDP

• "we expect GDP to grow modestly and inflation to stay close to the 2% target."
• After a strong third quarter, economic growth likely stalled in the fourth quarter.
• Overall, economic growth is expected to pick up gradually. The Bank of Canada projects annual average GDP growth of 1.1% in 2026 and 1.5% in 2027, broadly in line with our October projection.

INFLATION

• The Bank expects CPI inflation to stay close to the 2% target over the projection as tariff-related cost pressures are offset by excess supply.

TARIFFS

• Canadian economy continues to adjust to US trade restrictions.
• Tariffs and uncertainty continue to disrupt the Canadian economy.
• Exports continue to be buffeted by US tariffs, while domestic demand appears to be picking up.
• US tariffs and related uncertainty have held back business investment.
• The impact of US tariffs can also be seen in the labour market.
• Geopolitical risks are elevated and the upcoming review of the Canada-United States-Mexico Agreement is an important risk to the outlook.
• It’s also too early to tell how well the Canadian economy will adjust to current tariffs and ongoing uncertainty.