National Bank of Canada's (NBC) Taylor Schleich and Vy Le highlight that Canada’s 2026 Gross Domestic Product (GDP) forecast has been cut to 0.7%, leaving the economy lagging U.S. growth above 2%. They argue weak activity has offset recent inflation, allowing the Bank of Canada to avoid tightening. With core prices contained and energy risks receding, they expect Canadian inflation to glide back to 2% and policy to stay on hold into 2027.

Growth underperformance supports dovish BoC

"Bloomberg’s June economic survey (released Friday) offers another chance to highlight Canada’s ongoing economic struggles."

"Due to weaker-than-expected performance to start the year, the consensus forecast for 2026 Canadian GDP growth has been cut to just 0.7% (from 1.1%)."

"A weak economy has acted as a counterbalance to the recent inflation pop, allowing the BoC to hold off from tightening."

"And now, with core price pressures in check and energy risks receding, Canadian inflation is on a glide path back to 2%, which should keep the Bank sidelined into 2027."

"That’s hardly a controversial call as all but three (of 19) forecasters see the policy rate on hold this year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)