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At the end of 2024, global economic growth was solid, and inflation had eased further toward central banks’ targets. Since then, the United States has imposed large and broad-based tariffs on most of its trading partners.

This article examines another strategy in the Bank's approach to dealing with an uncertain world: the use of carefully articulated models to produce economic forecasts and to examine the implications of the various risks to those forecasts. Economic models are deliberate simplifications of a complex world that allow economists to make predictions that are reasonably accurate and that can be easily understood and communicated. By using several models, based on competing paradigms, the Bank minimizes policy errors that could result from relying on one view of the world and one philosophy of model design. The authors review some of the models currently used at the Bank, as well as the role of judgment in the projection process.

Economists' long-standing interest in the degree to which exchange rate movements are reflected in prices was rekindled in the 1970s by a combination of rising inflation and the adoption of more flexible exchange rate regimes in many industrialized countries. Specifically, there were concerns that a large currency depreciation could degenerate into an inflationary spiral. Such fears were curtailed in the 1980s and early 1990s as industrialized countries began to reduce and stabilize their inflation rates. The low-inflation period most industrialized countries entered approximately a decade ago coincided with significant exchange rate depreciations that had much smaller effects on consumer prices than expected. This led to a belief that the extent to which exchange rate movements are passed through to consumer prices has declined. In this article, the authors examine why pass-through could be incomplete and review empirical estimates to determine whether pass-through has indeed declined, suggesting possible reasons for this decline and discussing the implications for monetary policy.

We explore the drivers of the surge in inflation in Canada during the COVID-19 pandemic. This work is part of a joint effort by 11 central banks using the model developed by Bernanke and Blanchard (2023) to identify similarities and differences across economies.

For many Canadians, one of the most important investments they'll make is the purchase of a house. And for you as financial market professionals, the links between the housing market and financial markets have important consequences.

Economic growth in Canada is forecast to pick up gradually. Inflation is expected to remain around 2% as core inflation slows.

We produce forecasts for four risk scenarios to consider their usefulness for monitoring the Canadian economy. We find a high-oil-price scenario benefits the economy, a US recession induces a slowdown, a tight labor market leads to price increases, and a restrictive monetary policy scenario increases the unemployment rate while lowering the inflation rate.

Lending to business is central to economic growth because it supports investment by firms. Knowing how market participants view risk in the financial system can give the Bank of Canada information about future growth in business loans. In this note, we look at three market-based risk measures and find that sudden increases in the perception of risk in the Canadian banking system are associated with a weaker outlook for business loans and real gross domestic product.

This is an account of the deliberations of the Bank of Canada’s Governing Council leading to the monetary policy decision on December 6, 2023.

Projections for Canadian economic growth have been increased to 3.1 per cent this year and 2.1 per cent in 2018, with growth of 1.5 per cent forecast for 2019.