Highlights
In its quarterly Monetary Policy Report released Wednesday, the bank forecast that Canada's GDP will grow at an annualized pace of 1.5 percent (revised up from 1.0 percent forecast in April) in the April-June quarter of 2023 after surging 3.1 percent in January-March on relatively mild winter and resilient consumer spending and posting a mild 0.1 percent contraction in the final quarter of 2022.
The bank projected that the growth rate will remain solid at 1.5 percent in July-September. The GDP was flat on the month in April but Statistics Canada's advance estimate for May is a 0.4 percent jump, led by growth in the manufacturing and wholesale trade sectors as well as offices of real estate agents and brokers.
For the whole year, the bank raised its 2023 GDP growth forecast to 1.8 percent from 1.4 percent projected in April while revising down its 2024 growth forecast slightly to 1.2 percent from 1.3 percent. The bank forecast Canada's economic growth will pick up to 2.4 percent in 2025, revised down slightly from its first estimate of 2.5 percent made three months ago.
BoC Expects Inflation to Return to Target in 2025, Delayed from Previous Forecast of 2024
The bank's latest consumer inflation outlook for 2023 is 3.7 percent, up from 3.5 percent projected in April. The consumer price index jumped 6.8 percent in 2022 after a 3.4 percent rise in 2021.
As for the CPI in 2024, the bank forecast the annual inflation rate would drift down to 2.5 percent but still above its 2 percent target and revised up from 2.3 percent forecast in April. The bank's CPI estimate for 2025 is 2.1 percent, unchanged from 2.1 percent projected three months ago.
The downward momentum in inflation is slowing, largely because demand in Canada continues to outpace supply, the bank said in the July MPR.
"Household spending has been robust, supported by strong demand for labour, population growth and accumulated household savings," it said."Housing resales and house prices have picked up. At the same time, business investment is softening. Labour market conditions remain tight but appear to be easing."
The bank projected that the growth rate will remain solid at 1.5 percent in July-September. The GDP was flat on the month in April but Statistics Canada's advance estimate for May is a 0.4 percent jump, led by growth in the manufacturing and wholesale trade sectors as well as offices of real estate agents and brokers.
For the whole year, the bank raised its 2023 GDP growth forecast to 1.8 percent from 1.4 percent projected in April while revising down its 2024 growth forecast slightly to 1.2 percent from 1.3 percent. The bank forecast Canada's economic growth will pick up to 2.4 percent in 2025, revised down slightly from its first estimate of 2.5 percent made three months ago.
BoC Expects Inflation to Return to Target in 2025, Delayed from Previous Forecast of 2024
The bank's latest consumer inflation outlook for 2023 is 3.7 percent, up from 3.5 percent projected in April. The consumer price index jumped 6.8 percent in 2022 after a 3.4 percent rise in 2021.
As for the CPI in 2024, the bank forecast the annual inflation rate would drift down to 2.5 percent but still above its 2 percent target and revised up from 2.3 percent forecast in April. The bank's CPI estimate for 2025 is 2.1 percent, unchanged from 2.1 percent projected three months ago.
The downward momentum in inflation is slowing, largely because demand in Canada continues to outpace supply, the bank said in the July MPR.
"Household spending has been robust, supported by strong demand for labour, population growth and accumulated household savings," it said."Housing resales and house prices have picked up. At the same time, business investment is softening. Labour market conditions remain tight but appear to be easing."
Definition
Since 2009 the Bank of Canada (BoC) has regularly updated its economic view via a quarterly Monetary Policy Report. This presents base-case projections for inflation and growth in the Canadian economy as well as an assessment of the risks. The forecast provides a platform upon which the monetary authority can base its decisions with regards to any changes in official interest rates (and/or unconventional monetary instruments).
Description
Each quarter, the MPR gives the financial markets a view of the BoC's governing council thinking. This provides important guidance especially since the BoC does not publish minutes from its policy setting meetings. The report is released at the same time as the policy announcement is made.
