Economic Outlook

Canada Economic Outlook

The Canadian economy continues to operate at or near full capacity, with a trend-like advance of 2.0% expected in 2018, followed by a slightly slower 1.8% pace of growth in the next two years. Although job growth has decelerated compared to the rate of advance in 2017, some moderation is expected at this point in the cycle. Elevated oil prices have continued to push up headline inflation this year, but this is expected to be transitory, and core readings remain right around the midpoint of the Bank of Canada's (BoC) target range. Meanwhile, capacity utilization rates remain at decade highs and inflation expectations in the latest Business Outlook Survey continued to move up moderately. Thus, the BoC is projected to continue on a gradual path of rate hikes, with the next move in October, followed by three hikes in 2019. Risks to the forecast emanate mainly from trade and geopolitical developments.