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The risks around inflation are unusually high. The main risk is associated with trade relations with the United States. The war in the Middle East presents a new risk.

The Canadian economy continues to adjust to US tariffs and trade uncertainty, with economic activity on a lower path than before tariffs were imposed. The war in the Middle East is also affecting the outlook. Inflation is projected to rise in the near term before easing toward 2% in early 2027, while economic growth remains modest.

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.

The Canadian economy is expected to have grown modestly in early 2026. After being close to 2% for more than a year, inflation increased in March as the war in the Middle East pushed up oil prices. Inflation is expected to rise further in April.

The war in the Middle East has driven up inflation worldwide and is weighing on global growth. Uncertainty has risen markedly. US trade policy continues to reshape global trade.

Before the outbreak of the war in the Middle East, the Canadian economy was evolving as expected. Since the war began, oil prices have risen, pushing inflation up, and the outlook has become more uncertain.

The 2025 Annual Report includes the financial statements and a message from Governor Tiff Macklem.

This report lays out elements of the Bank’s strategy related to climate change and details how the issue will be managed holistically across the organization, following the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. Content Type(s): Publications, Disclosure of Climate-Related Risks

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Learn about the publication of, and calculation methodology for, the foreign exchange (FX) rate data on the Bank of Canada’s website.