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Monetary policy is working to reduce price pressures in the Canadian economy. Core inflation is expected to ease gradually, while the path of CPI inflation will be bumpy. Inflation returns sustainably to the 2% target in the second half of 2025.

Inflation in Canada has been below 3% since January and broad inflationary pressures are easing. Economic growth has picked up, led by population gains.

Monetary policy is working to reduce price pressures in the Canadian economy. Core inflation is expected to ease gradually, while the path of CPI inflation will be bumpy.

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

A rise in newcomer arrivals has boosted Canada’s population growth in recent years, adding to both supply and demand. Assessing how this change impacts the economy can provide insight into inflationary pressures.

Inflation in the prices of goods excluding energy has fallen sharply across many economies, while inflation in services excluding shelter remains elevated. Examining the factors behind recent shifts can provide insights into where inflation may be headed, at least over the near term.

The Bank sees two broad types of upside risks to the inflation outlook and two main downside risks, though the base-case scenario is considered the mostly likely outcome.

Economic growth in Canada is forecast to improve in the second half of 2024 and strengthen further in 2025 and 2026. Core inflation is expected to ease gradually, while the path of CPI inflation will be bumpy.

The global economy is forecast to grow at around 3% over the projection horizon, in line with its current pace. Inflation remains above central bank targets.

Canada’s economic growth is forecast to increase as interest rates gradually ease and both household and business confidence rise. Inflation is projected to return to the 2% target in 2025, though the trajectory may be bumpy.