{"id":148622,"date":"2026-07-29T20:54:07","date_gmt":"2026-07-29T20:54:07","guid":{"rendered":"https:\/\/www.europesays.com\/canada\/148622\/"},"modified":"2026-07-29T20:54:07","modified_gmt":"2026-07-29T20:54:07","slug":"bank-of-canada-expects-economic-rebound-decelerating-inflation-rate-but-risks-remain","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/canada\/148622\/","title":{"rendered":"Bank of Canada expects economic rebound, decelerating inflation rate but risks remain"},"content":{"rendered":"

\"HCP_Politics05192026_017.JPG\"<\/a> Bank of Canada governing council members expect economic growth to rebound to about 2.5 per cent in the second quarter of 2026. (Credit: HYUNGCHEOL PARK\/Postmedia) <\/p>\n

Canada’s economy<\/a> showed signs of growth in the second quarter of 2026, but uncertainty from U.S. trade policies<\/a> and the war in Iran means monetary policy<\/a> must remain nimble, the Bank of Canada’s<\/a> governing council said during deliberations preceding its July 15 interest rate decision<\/a>. <\/p>\n

A summary of deliberations\u00a0that led to the council’s decision to hold interest rates steady at 2.25 per cent shows that members discussed Canada’s sluggish economy. Gross domestic product<\/a> had not grown between the first quarter of 2025 and the first quarter of 2026, members said, and the heightened uncertainty around tariffs and the Canada\u2013U.S.\u2013Mexico<\/a> (CUSMA) agreement had kept the economy in excess supply. <\/p>\n

However, members noted recent indicators that showed the economy was recovering in the second quarter of 2026 after it adjusted\u00a0to the U.S. tariffs<\/a> and geopolitical turbulence, and the growth was broadening instead of relying on strong consumer and government spending. <\/p>\n

For example, growth in exports had resumed and business investment is expected to pick up and broaden in the near term due to increased investment in the oil and gas sector. <\/p>\n

Labour Force Survey data for May and June showed that job growth has resumed, even if the labour market remained soft and the unemployment rate remained elevated at 6.5 per cent\u00a0last month and most of the past year. <\/p>\n

Governing council members expect economic growth to rebound to about 2.5 per cent in the second\u00a0quarter of 2026. Overall, the economy is expected to grow by 0.7 per cent in 2026 followed by 1.8 per cent in both 2027 and 2028. <\/p>\n

Inflation<\/a> is also expected to ease gradually in the coming months, assuming oil prices continue to fall<\/a>. Global oil prices were declining when the governing council met to discuss the overnight rate, but renewed strikes in the Middle East mean the inflation outlook may change if prices rise again. <\/p>\n

The central bank<\/a> expects inflation to edge down to 2.5 per cent in the second half of 2026 before hovering at around two per cent in 2027 and 2028, even with some monthly fluctuations in the data. <\/p>\n

“Overall, after a period of weak growth and a spike in inflation, growth was resuming and inflation was easing. Members agreed that this meant the trade-off facing monetary policy had diminished. However, uncertainty was still high,” the summary of deliberations read. <\/p>\n

“Members agreed that, based on the forecast, the current policy stance was appropriate for sustaining the economic recovery and bringing inflation back to target \u2026 Governing Council members agreed they would adjust monetary policy as needed to maintain Canadians’ confidence in price stability.” <\/p>\n

Council members noted several risks that could change their economic forecasts and determine whether the rebound in growth could be sustained long term. <\/p>\n

For example, the move to annual CUSMA reviews means trade uncertainty will remain. The possibility of new U.S. tariffs will also be a downside risk to growth. <\/p>\n

The ongoing war in the Middle East raises the risk that the high cost of fuel will spillover to other goods and services in the Canadian economy, broadening inflation. <\/p>\n

Consumer spending could also wane if the labour market<\/a> remains soft and hiring doesn’t pick up, and weak business investment could reduce productivity and limit the economy’s capacity to grow without creating inflationary pressures. <\/p>\n

“Overall, given recent data, Governing Council was confident about the rebound in GDP growth in the second quarter. But there was a range of views among \u2026\u00a0members about the sustainability of the rebound beyond the near term. Members agreed they would need to monitor the data closely for signs that growth was broadening as projected in the July Report,” the summary said. <\/p>\n

\u2022 Email: ptran@postmedia.com<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"Bank of Canada governing council members expect economic growth to rebound to about 2.5 per cent in the…\n","protected":false},"author":2,"featured_media":148623,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[693,17,11048,1751,6700,19481,48129,6702,4996],"class_list":["post-148622","post","type-post","status-publish","format-standard","has-post-thumbnail","category-canada","tag-bank-of-canada","tag-canada","tag-council-members","tag-economic-growth","tag-governing-council","tag-governing-council-members","tag-interest-rate-decision","tag-monetary-policy","tag-uncertainty"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/148622","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/comments?post=148622"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/148622\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media\/148623"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media?parent=148622"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/categories?post=148622"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/tags?post=148622"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}