Monetary Policy Report—July 2026
The outlook for Canadian growth is broadly unchanged. After a weaker‑than‑expected start to 2026, GDP growth is projected to be slightly stronger in 2027 and 2028. Although near‑term inflation has been a bit higher than anticipated, the outlook for inflation is little changed.
The Canadian economy is evolving largely as expected (Chart 21).
Changes to the projection
Canadian outlook
Growth in gross domestic product (GDP) for 2026 is projected to be 0.5 percentage points lower than estimated in the April Report due to a weaker‑than‑expected start to the year (Table 2). The unexpected weakness mainly reflects a decline in government spending in the first quarter.
| 2025 | 2026 | 2027 | 2028 | |
|---|---|---|---|---|
| Consumption | 1.3 (1.2) | 0.9 (0.8) | 0.8 (0.5) | 0.6 (0.6) |
| Housing | 0.0 (0.1) | -0.2 (-0.1) | 0.1 (0.1) | 0.2 (0.2) |
| Government | 0.8 (0.8) | 0.5 (0.9) | 0.8 (0.7) | 0.5 (0.4) |
| Business fixed investment | 0.0 (0.0) | 0.2 (0.1) | 0.2 (0.3) | 0.2 (0.3) |
| Subtotal: final domestic demand | 2.1 (2.1) | 1.4 (1.7) | 1.9 (1.6) | 1.5 (1.5) |
| Exports | -0.5 (-0.5) | 0.5 (-0.2) | 0.6 (0.8) | 0.8 (0.9) |
| Imports | 0.1 (0.2) | -1.0 (-0.3) | -0.6 (-0.7) | -0.7 (-0.7) |
| Inventories | 0.0 (0.0) | -0.2 (0.0) | -0.1 (-0.1) | 0.2 (0.0) |
| GDP | 1.9 (1.7) | 0.7 (1.2) | 1.8 (1.6) | 1.8 (1.7) |
| Memo items (percentage change): | ||||
| Range for potential output | 2.3 (2.3) | 0.8–1.6 (0.8–1.6) | 0.8–1.8 (0.8–1.8) | 1.0–2.0 (1.0–2.0) |
| CPI inflation | 2.1 (2.1) | 2.5 (2.3) | 2.0 (2.1) | 2.1 (2.0) |
* Numbers in parentheses are from the April Report.
† Numbers may not add to total due to rounding and Statistics Canada’s statistical discrepancy.
Sources: Statistics Canada and Bank of Canada calculations, estimates and projections
GDP growth is then 0.2 percentage points higher in 2027 mainly because of an upward revision to the outlook for consumption spending.
Exports are revised up over the projection horizon, partly supported by additional energy‑related activity. For non‑commodity exports, the upward revision reflects survey evidence pointing to slightly improved prospects, including stronger demand linked to US investment in artificial intelligence.1
Near‑term inflation has been a bit stronger than expected in the April Report, but the outlook for inflation is little changed (Table 3). The near‑term strength is due to higher oil prices, elevated gasoline refinery margins and a weaker Canadian dollar.
| 2025 | 2026 | 2025 | 2026 | 2027 | 2028 | ||||
|---|---|---|---|---|---|---|---|---|---|
| Q4 | Q1 | Q2 | Q3 | Q4 | Q4 | Q4 | Q4 | ||
| CPI inflation (year-over-year percentage change) | 2.2 (2.2) |
2.2 (2.2) |
3.0 (2.6) |
2.5 |
2.2 (2.2) |
2.4 (2.2) |
2.0 (2.0) |
2.1 (2.0) |
|
| Core inflation (year-over-year percentage change)† | 2.8 (2.8) |
2.4 (2.4) |
2.1 (2.1) |
2.0 |
2.8 (2.8) |
2.0 (2.0) |
2.2 (2.2) |
2.1 (2.0) |
|
| Real GDP (year-over-year percentage change) | 0.7 (0.7) |
-0.1 (0.6) |
0.8 (1.2) |
0.7 |
0.7 (0.7) |
1.4 (1.8) |
1.9 (1.4) |
1.8 (1.9) |
|
| Real GDP (quarter-over-quarter percentage change at annual rates)‡ | -1.0 (-0.6) |
-0.1 (1.5) |
2.5 (1.5) |
1.5 |
|||||
* See details in the Tariff and other assumptions section. Numbers in parentheses are from the April Report.
† Core inflation is the average of CPI‑trim and CPI‑median.
‡ At the time of the projection, 2026Q2 and 2026Q3 are the only quarters for which some information about real GDP growth was available. For longer horizons, fourth‑quarter‑over‑fourth‑quarter percentage changes are presented. They show the Bank of Canada’s projected growth rates of CPI and real GDP within a given year. They can therefore differ from the growth rates of annual averages shown in Table 2.
Sources: Statistics Canada and Bank of Canada calculations, estimates and projections
Global outlook
The outlook for growth across major economies is broadly unchanged from the April Report (Table 4). Global GDP for 2026 has been revised down slightly because the war in the Middle East has weighed more heavily than expected on activity in the Persian Gulf region. Growth in the Persian Gulf region has been revised up for 2027.
| Share of global GDP* (%) | Growth† (%) | ||||
|---|---|---|---|---|---|
| 2025 | 2026 | 2027 | 2028 | ||
| United States | 15 | 2.1 (2.1) |
2.4 (2.4) |
2.4 (2.3) |
2.4 (2.3) |
| Euro area | 12 | 1.5 (1.5) |
0.4 (0.9) |
1.2 (1.1) |
1.3 (1.3) |
| China | 19 | 5.0 (5.0) |
4.7 (4.7) |
4.2 (4.2) |
4.1 (4.2) |
| World | 100 | 3.5 (3.5) |
2.8 (3.0) |
3.2 (3.0) |
3.2 (3.2) |
* Shares of GDP are based on International Monetary Fund (IMF) estimates of the purchasing‑power‑parity valuation of country GDPs for 2024 from the IMF’s October 2025 World Economic Outlook.
† Numbers in parentheses are projections from the April Report.
Sources: National sources via Haver Analytics and Bank of Canada calculations, estimates and projections
Endnotes
- 1. See Bank of Canada, Business Outlook Survey—Second Quarter of 2026 (July 2026).[←]