The Bank of Canada published its July Monetary Policy Report, saying Canada’s economy is starting to improve after a year of weakness. It expects growth to pick up over the projection horizon and run above potential output growth, while headline inflation, now above 3%, should ease gradually from its recent peak and return to target as cost pressures fade and excess capacity is absorbed. Inflation excluding gasoline remains near 2%, and the bank said uncertainty is still high. The report says the outlook for Canadian growth is broadly unchanged. After a weaker-than-expected start to 2026, gross domestic product growth is projected to be slightly stronger in 2027 and 2028. Although near-term inflation has been somewhat higher than previously anticipated, the overall inflation outlook is little changed. The bank assumes oil prices will decline, and says trade within North America remains mostly free of tariffs, although some industries have been hit hard by sector-specific measures. The Bank of Canada identifies Canada’s trade relationship with the United States and the war in the Middle East as the two main risks to the inflation outlook. Its in-focus analysis says war-related supply disruptions are still feeding through supply chains and into consumer prices, creating material cost pressures for the inflation outlook.
Bank of Canada2026-07-15
Bank of Canada publishes July Monetary Policy Report, sees growth improving and inflation easing from above 3%
The Bank of Canada’s July Monetary Policy Report says Canada’s economy is beginning to recover, with growth expected to strengthen and inflation to ease gradually from above 3% back to target. It says the overall outlook is little changed, despite a weaker start to 2026 and somewhat higher near-term inflation. The main inflation risks remain Canada’s trade relationship with the United States and the war in the Middle East.