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Economic growth has ticked up in Canada, boosted by past cuts in interest rates. In the absence of new tariffs, growth is forecast to strengthen, and inflation remains close to 2%. But the threat of new tariffs is causing major uncertainty.

Economic growth in Canada is expected to pick up, supported by past interest rate cuts, and inflation is projected to remain close to the 2% target.

Global economic growth remains near 3%, and headline inflation is close to central bank targets in many countries. However, uncertainty has increased amid political and trade tensions. The outlook does not incorporate new tariffs threatened by the United States.

Economic growth in Canada is projected to rise to around 1.8% in 2025 and 2026, outpacing potential output, and excess supply is gradually absorbed. Inflation is expected to remain close to the Bank of Canada’s 2% target.

Inflation remains close to 2%, and past cuts in interest rates are boosting economic growth in Canada. At the same time, the threat of wide-ranging tariffs by the new US administration has increased uncertainty.

Governor Tiff Macklem discusses the Monetary Policy Report and the key issues involved in the Governing Council’s deliberations about the monetary policy decision.

On Wednesday, January 29, 2025, the Bank of Canada will announce its decision on the target for the overnight rate. A press release will provide a brief explanation of the decision. The Bank will also publish its quarterly Monetary Policy Report (MPR) at the same time as the rate decision.

The Canadian dollar has declined against the US dollar since October 2024, mostly due to rising uncertainty around trade policies. A widening differential in policy interest rates between the two countries has also played a modest role.

Economic growth has ticked up in Canada, boosted by past cuts in interest rates. In the absence of new tariffs, growth is forecast to strengthen, and inflation remains close to 2%. But the threat of new tariffs is causing major uncertainty.

The new US administration is considering sweeping tariffs on imports. While many important elements are unknown, these measures could be highly disruptive to the Canadian and US economies.