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CA: BoC Monetary Policy Report
Highlights
In its October Monetary Policy Report, the BOC revised up both its growth and inflation projections supporting its decision to raise its policy rate to 2.50 percent from 2.25 percent.
The projections show GDP is now expected to gow 1.0 percent in 2026, revised up from 0.7 percent in the July MPR. Canada's economic activity is projected to accelerate to 2.0 percent in 2027 and 2028, both revised up from 1.8 percent.
Meanwhile, inflation was revised up to 2.9 percent from 2.5 percent in 2026, and more significantly, to 3.1 percent from 2.0 percent for 2027, to come back down to 2.2 percent in 2028.
In the shorter term, CPI inflation is now projected to average 3.0 percent in the third quarter, revised up from 2.5 percent, and accelerating to 3.4 percent in the fourth quarter of this year.
"Inflation is revised up because of higher and more persistent energy prices as well as
higher non-energy import prices," the report said.
Real GDP is projected to slow to an annualized rate of 2.0 percent in Q3 (revised up from 1.5 percent) and 0.8 percent in Q4, from 3.3 percent in Q2 (revised up from 2.5 percent).
In addition to stronger-than-expected activity, the improved growth outlook reflects new incentives for business investment and an upward revision to population, the MPR said.
Meanwhile, the global context points to"resilient" economic activity, with AI-related investment supporting growth in the U.S. As a result, the BoC revised up its growth outlook for the global economy as well, with a GDP growth now seen at 3.1 percent.
On the financial front, it pointed out tighter conditions compared to July, with higher sovereign bond yields in advanced economies,"volatile" equity and credit markets, while the Canadian dollar recovered after a period of U.S. dollar strength.
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.