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Canada Growth Set to Slow in H2 Before Rebounding in 2027, Capital Economics Says

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The Canadian economy strengthened in the second quarter, but growth is expected to slow in the second half of 2026 amid ongoing uncertainty over US-Mexico-Canada Agreement trade negotiations with the United States, according to Capital Economics.

With underlying activity still soft and core inflation near target, Capital Economics expects the Bank of Canada to hold its policy rate steady through year-end, Senior North America Economist Ariane Curtis said in a Thursday's note.

With a USMCA agreement in place and government infrastructure spending supporting activity, growth should strengthen to 1.7% next year, said Capital Economics, adding it sees the BoC raising its policy rate by 50 basis points to 2.75% in response.

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