Bank of Canada Forecasts GDP Growth Rebound to 2.5% in Q2, Inflation to Return to 2% Target in Early 2027

According to Bank of Canada Governor Tiff Macklem, on July 15, Canada's second-quarter GDP grew 2.5% as consumption resilience offset headwinds from U.S. trade policies and prior supply gluts. Macklem stated that economic growth has reaccelerated after stagnation last year, with businesses adapting to shifting conditions. The central bank noted that the labor market remains weak, with unemployment rates ranging from 6.5% to 7%.

Regarding inflation, Macklem said that after consumer prices rose 3.2% in May due largely to fuel costs linked to Middle East tensions, the Bank of Canada expects inflation to gradually ease to its 2% target by early 2027, assuming oil prices stabilize between $70-$75 per barrel. He cautioned that prolonged elevated oil prices risk broader price pressures across other goods and services, but stated the central bank is prepared to adjust monetary policy as needed.