Monetary Policy Report—April 2026
The outlook for Canadian economic growth in 2026 and 2027 is evolving generally as anticipated. Inflation is expected to increase in 2026 due to higher gasoline prices caused by the war in the Middle East. It will then ease in 2027 as oil prices are assumed to moderate.
Changes to the projection
Canadian outlook
Projections for growth in gross domestic product (GDP) for 2026 and 2027 are broadly in line with those in the January Report (Chart 23). Overall, the impact of higher global oil prices on economic activity is small. Growth in government spending has been revised up, largely due to increased provincial investment outlined in 2026 budgets. Residential investment is revised down, reflecting ongoing affordability challenges for homebuyers.
Consumer price index (CPI) inflation is projected to be about 0.3 percentage points higher in 2026 than anticipated in the January Report. The increase is mainly due to higher energy prices resulting from the war in the Middle East, with the temporary suspension of the federal fuel excise tax providing a partial offset. Inflation is then expected to remain roughly in line with the January Report (Table 2 and Table 3).
| 2025 | 2026 | 2027 | 2028 | |
|---|---|---|---|---|
| Consumption | 1.2 (1.2) | 0.8 (0.7) | 0.5 (0.6) | 0.6 |
| Housing | 0.1 (0.1) | -0.1 (0.2) | 0.1 (0.2) | 0.2 |
| Government | 0.8 (0.6) | 0.9 (0.7) | 0.7 (0.6) | 0.4 |
| Business fixed investment | 0.0 (0.0) | 0.1 (0.1) | 0.3 (0.3) | 0.3 |
| Subtotal: final domestic demand | 2.1 (1.9) | 1.7 (1.7) | 1.6 (1.7) | 1.5 |
| Exports | -0.5 (-0.9) | -0.2 (-0.1) | 0.8 (0.7) | 0.9 |
| Imports | 0.2 (0.2) | -0.3 (-0.1) | -0.7 (-0.8) | -0.7 |
| Inventories | 0.0 (0.5) | 0.0 (-0.4) | -0.1 (-0.1) | 0.0 |
| GDP | 1.7 (1.7) | 1.2 (1.1) | 1.6 (1.5) | 1.7 |
| Memo items (percentage change): | ||||
| Range for potential output | 2.3 (1.9–2.7) | 0.8–1.6 (0.6–1.6) | 0.8–1.8 (0.7–1.7) | 1.0–2.0 |
| CPI inflation | 2.1 (2.1) | 2.3 (2.0) | 2.1 (2.1) | 2.0 |
* Numbers in parentheses are from the January Report.
† Numbers may not add to total due to rounding.
Sources: Statistics Canada and Bank of Canada calculations, estimates and projections
| 2025 | 2026 | 2025 | 2026 | 2027 | 2028 | ||||
|---|---|---|---|---|---|---|---|---|---|
| Q3 | Q4 | Q1 | Q2 | Q4 | Q4 | Q4 | Q4 | ||
| CPI inflation (year-over-year percentage change) | 2.0 (2.0) |
2.2 (2.2) |
2.2 (2.0) |
2.6 |
2.2 (2.2) |
2.2 (1.9) |
2.0 (2.1) |
2.0 |
|
| Core inflation† (year-over-year percentage change) | 3.1 (3.1) |
2.8 (2.9) |
2.4 (2.5) |
2.1 |
2.8 (2.9) |
2.0 (2.1) |
2.2 (2.1) |
2.0 |
|
| Real GDP (year-over-year percentage change) | 1.6 (1.4) |
0.7 (0.7) |
0.6 (0.6) |
1.2 |
0.7 (0.7) |
1.8 (1.4) |
1.4 (1.7) |
1.9 |
|
| Real GDP (quarter-over-quarter percentage change at annual rates)‡ | 2.4 (2.6) |
-0.6 (0.0) |
1.5 (1.8) |
1.5 |
|||||
* See details in the Tariff and other assumptions section. Numbers in parentheses are from the January Report.
† Core inflation is the average of CPI‑trim and CPI‑median.
‡ At the time of the projection, 2026Q1 and 2026Q2 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 global growth is weaker in the near term than it was in the January Report (Table 4) because of the war in the Middle East. The medium-term outlook remains broadly unchanged.
- The surge in energy prices is leading to softer growth than projected in January for most regions. The downward revision is more significant for economies that import oil and liquefied natural gas.
- This is partially offset by an upward revision to potential output growth across all regions, driven largely by the growing adoption of artificial intelligence (see Appendix: Potential output and the nominal neutral rate of interest).
- The global average US tariff rate has been revised down by 3.2 percentage points since the January Report but remains 9.3 percentage points higher than in the January 2025 Report (see the Tariff and other assumptions section). This change has a small positive effect on global growth.
Inflation is revised up in most regions in the short term due to the recent rise in energy prices.
| Share of global GDP* (%) | Growth (%) | ||||
|---|---|---|---|---|---|
| 2025 | 2026 | 2027 | 2028 | ||
| United States | 15 | 2.1 (2.2) |
2.4 (2.6) |
2.3 (2.1) |
2.3 |
| Euro area | 12 | 1.5 (1.5) |
0.9 (1.2) |
1.1 (1.4) |
1.3 |
| China | 19 | 5.0 (5.0) |
4.7 (4.5) |
4.2 (4.2) |
4.2 |
| World | 100 | 3.5 (3.5) |
3.0 (3.2) |
3.0 (3.0) |
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 January Report.
Sources: National sources via Haver Analytics and Bank of Canada calculations, estimates and projections