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The prospect of wide-ranging US import tariffs is the most important risk to the outlook. Given the fast-evolving situation and the high degree of uncertainty, the Bank has chosen not to include new tariffs in the projection.

Results from the Business Outlook Survey and the Business Leaders’ Pulse show that overall business conditions remain subdued, but firms are beginning to anticipate improvements in activity. Sales outlooks continue to show signs of improvement after a period of weakness. Yet many businesses still have spare capacity, which is reducing their need to expand. Firms expect cost growth, including wages, to soften further. Expectations for inflation moved slightly higher but remain within the Bank of Canada’s target range.

Results from the CSCE show that consumer sentiment improved this quarter, mainly due to recent interest rate cuts and the expectation of further cuts ahead. Consumers reported stronger spending plans. Still, they reported that high prices of many goods and services, economic uncertainty and elevated housing costs continue to weigh on spending decisions. Consumer confidence in the labour market has weakened and is now slightly below the survey average. Consumers’ inflation expectations have largely returned to historical norms.

On Monday, January 20, 2025, the Bank of Canada will release the fourth quarter issues of the Business Outlook Survey and the Canadian Survey of Consumer Expectations.

This paper provides an extensive evaluation of the performance of quantile vector autoregression (QVAR) to forecast macroeconomic risk. Generally, QVAR outperforms standard benchmark models. Moreover, QVAR and QVAR augmented with factors perform equally well. Both are adequate for modeling macroeconomic risks.

The Bank of Canada’s exceptional policy actions during the COVID-19 pandemic provided important support for the economy during the unprecedented shock, says a review published today.

On Friday, January 17, 2025, the Bank of Canada will publish its report on the exceptional policy actions undertaken in response to the COVID-19 pandemic. The documents will also include a review by an external panel of experts, and a response from the Bank’s Governing Council.

This review looks at the effectiveness of the Bank’s exceptional policy actions during the pandemic. It also draws several lessons that will help shape future decisions should these tools be needed again.