Monetary Policy Report—October 2026
The outlook for the Canadian economy has improved somewhat, reflecting data showing stronger‑than‑expected activity, new incentives for business investment and an upward revision to population. Inflation is revised up because of higher and more persistent energy prices as well as higher non‑energy import prices.
Inflation in 2027 is projected to be about 1 percentage point higher than forecasted in the July Report (Chart 24). Growth in gross domestic product (GDP) is somewhat stronger over the projection horizon.
Changes to the projection
Canadian outlook
GDP growth in 2026 is projected to be 0.3 percentage points higher than in the July Report (Table 2). Consumption and exports account for most of the upward revision. This is partly offset by a bigger drag from inventories. Potential output is also higher due to an upward revision to Canada’s population.
| 2025 | 2026 | 2027 | 2028 | |
|---|---|---|---|---|
| Consumption | 1.3 (1.3) |
1.3 (0.9) |
1.0 (0.8) |
1.1 (0.6) |
| Housing | 0.0 (0.0) |
-0.1 (-0.2) |
0.1 (0.1) |
0.0 (0.2) |
| Government | 0.8 (0.8) |
0.5 (0.5) |
0.7 (0.8) |
0.6 (0.5) |
| Business fixed investment | 0.0 (0.0) |
0.2 (0.2) |
0.5 (0.2) |
0.4 (0.2) |
| Subtotal: final domestic demand | 2.1 (2.1) |
1.9 (1.4) |
2.3 (1.9) |
2.1 (1.5) |
| Exports | -0.5 (-0.5) |
0.8 (0.5) |
0.4 (0.6) |
0.7 (0.8) |
| Imports | 0.1 (0.1) |
-0.9 (-1.0) |
-0.6 (-0.6) |
-0.8 (-0.7) |
| Inventories | 0.0 (0.0) |
-0.8 (-0.2) |
-0.1 (-0.1) |
0.0 (0.2) |
| GDP | 1.9 (1.9) |
1.0 (0.7) |
2.0 (1.8) |
2.0 (1.8) |
| 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) |
2.9 (2.5) |
3.1 (2.0) |
2.2 (2.1) |
* Numbers in parentheses are from the July 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 about 0.2 percentage points stronger in 2027 and 2028 (Table 2 and Table 3). Most of the upward revision reflects increased consumption. Business investment is also stronger, driven in part by the federal government’s recently announced Productivity Mega Deduction. These effects are partly offset by the impacts of higher US tariffs, greater trade policy uncertainty and higher long‑term interest rates.
| 2026 | 2025 | 2026 | 2027 | 2028 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Q4 | Q4 | Q4 | Q4 | ||
| CPI inflation (year-over-year percentage change) | 2.2 (2.2) |
3.0 (3.0) |
3.0 (2.5) |
3.4 |
2.2 (2.2) |
3.4 (2.4) |
2.6 (2.0) |
2.1 (2.1) |
|
| Real GDP (year-over-year percentage change) | 0.1 (-0.1) |
1.1 (0.8) |
1.2 (0.7) |
1.6 |
0.7 (0.7) |
1.6 (1.4) |
2.2 (1.9) |
2.0 (1.8) |
|
| Real GDP (quarter-over-quarter percentage change at annual rates)† | 0.3 (-0.1) |
3.3 (2.5) |
2.0 (1.5) |
0.8 |
|||||
* See details in the Tariff and other assumptions section. Numbers in parentheses are from the July Report.
† At the time of the projection, 2026Q3 and 2026Q4 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
Consumer price index inflation is projected to be 0.4 percentage points higher in 2026 and about 1 percentage point higher in 2027 than expected at the time of the July Report (Table 2). The revision reflects higher oil prices and refinery margins, which are expected to remain elevated for longer because of conflicts abroad. Higher import prices and Canadian counter‑tariffs also add modest upward pressure. The suspension of the federal fuel excise tax partly offsets these effects in late 2026 and early 2027 until it expires in April 2027.
Global outlook
The growth outlook across major economies is broadly unchanged from the July Report (Table 4).
| Share of global GDP* (%) | Growth† (%) | ||||
|---|---|---|---|---|---|
| 2025 | 2026 | 2027 | 2028 | ||
| United States | 15 | 2.3 (2.1) |
2.4 (2.4) |
2.5 (2.4) |
2.4 (2.4) |
| Euro area | 11 | 1.3 (1.5) |
0.9 (0.4) |
1.2 (1.2) |
1.3 (1.3) |
| China | 20 | 5.0 (5.0) |
4.6 (4.7) |
4.2 (4.2) |
4.1 (4.1) |
| World | 100 | 3.5 (3.5) |
3.1 (2.8) |
3.2 (3.2) |
3.1 (3.2) |
* Shares of GDP are based on International Monetary Fund (IMF) estimates of the purchasing‑power‑parity valuation of country GDPs for 2025 from the IMF’s October 2026 World Economic Outlook.
† Numbers in parentheses are projections from the July Report.
Sources: National sources via Haver Analytics and Bank of Canada calculations, estimates and projections