BoC MPR: Raises 2026 GDP forecast to 1.0% from 0.7%, 2027 and 2028 GDP raised to 2.0% from 1.8%

Memo Items (Percentage Change)

All figures are presented in percentage points; values in parentheses indicate the corresponding confidence interval.

Output Gap

• The output gap is estimated to range from -1.25% to -0.25% in the third quarter, in line with the July Report

Neutral Estimate

• The nominal neutral interest rate in Canada is assumed to be at the midpoint of its estimated range of 2.25% to 3.25% (unchnaged)

An MPR forecast revision of this kind sits in the middle of the Bank of Canada's communication calendar, between rate decisions, and the revisions here cut both ways: growth is marked up across the horizon, but so is the inflation profile, with CPI pencilled in above target further out than before. In past episodes where a G10 central bank has upgraded both legs simultaneously, the market read has tended to hinge on which revision dominates: firmer growth alone can be absorbed as demand-side reassurance, but paired with a higher inflation path it has historically been taken as hawkish, repricing the front end of the curve and supporting the currency. The unchanged neutral range estimate and the still-negative output gap are the counterweights, and central banks in this position have typically used the gap as justification for patience even as near-term projections firm. The composition matters as much as the headline: the upgrade here runs through consumption and business investment rather than net trade, which is the more durable variant. The follow-ons are the governing council commentary around the projection and how officials characterise the inflation overshoot relative to the gap, since that framing has tended to determine whether the rates market treats the revision as a signal on timing or merely noise between meetings.