Our updated forecast remains very similar to our last published views. Incoming data in Canada and the US have generally been modestly stronger than anticipated leading to minor upgrades to our growth forecast. Inflation remains a challenge though headline data continue to generally trend down as measures of underlying inflation in both countries remains firmer than policymakers would like. We remain of the view that risks to the inflation outlook remain tilted to the upside. The key elements of our forecast remain:

  • No recessions are expected in Canada or the US. US growth in 2024 (2.3%) is expected to more than double Canadian growth (1%).
  • Inflation remains a challenge for central banks. We continue to expect a sustained return to inflation targets in 2025. Given the greater economic momentum observed that expected so far this year along with strong wage growth and risks to supply chains, risks to inflation are tilted to the upside.
  • We remain comfortable with our views that the Bank of Canada will cut in September and that the Fed will cut in July given recent developments. Cuts of 75 basis points are forecast for Canada this year and 100 basis points of cuts are predicted in the US. We continue to believe the Fed will cut interest rates more rapidly than the Bank of Canada given overwhelmingly better productivity outcomes in the US. Further strength in economic activity, such as a stronger rebound in the Canadian housing market for instance, or upside surprises to inflation could push those rate cuts out further. 
Table 1: International: Real GDP, Consumer Prices 2021 to 2025
Table 2: North America: Real GDP 2021 to 2025 and Quarterly Forecasts
Table 3: Central Bank Rates, Currencies, Interest Rates 2022 to 2025
Table 4: The Provinces 2021 to 2025