Macklem stands pat, cautiously predicts stronger growth
Bank of Canada Deputy Governor Carolyn Rogers and Governor Tiff Macklem, pictured at a July 15 press conference, announced the bank’s key interest rate remains at 2.25%. / SCREENSHOT
Citing an improved business outlook, Bank of Canada Governor Tiff Macklem expressed cautious optimism about an uptick in GDP while holding the central bank’s key interest rate steady at 2.25%.
“After stalling over the past year, economic growth looks to have resumed in Canada,” Macklem said in a statement accompanying the rate-setting decision.
The bank forecast that the economy, after a weak first quarter, bounced back and will record 2.5% growth in the second quarter this year. For 2026 as a whole, GDP will come in at 0.7%, but it will be followed by stronger annual growth of 1.8% in 2027 and 2028.
The BoC said its predictions are subject to pronounced risks as a result of the ongoing Iran war and current free-trade negotiations with the U.S. in the midst of a trade war initiated by Washington.
But Mackelm emphasized improved expectations for business activity as Canadian companies have learned how to cope with U.S. tariffs. “Although the Canada-U.S.-Mexico Agreement is now subject to annual reviews, more businesses report they are finding ways to navigate through the uncertainty,” Macklem said.
Export sales are looking up
As a result, non‑commodity and non‑energy commodity exports are projected to recover as businesses continue to adjust to the new trade environment, the BoC said in its quarterly Monetary Policy Report.
Also, “results from Bank of Canada surveys show that businesses’ outlooks for future export sales have improved despite continued trade‑related uncertainty,” the MPR said. “Rising US investment in AI is anticipated to boost demand for Canadian raw materials, metal products and electrical equipment. The recent depreciation of the Canadian dollar makes Canada’s exports more competitive, providing additional support.”
Investment in oil and gas is estimated to have rebounded in response to higher oil prices, the report said. Beyond that, BoC survey results have suggested that business investment outside the energy sector also increased.
Also, prospects for an improved economic performance have been buoyed by government spending, improved financial conditions, solid consumer spending and a stabilized housing market, the Bank observed.
With inflation outside volatile gasoline prices looking tame, the BoC is widely expected to keep its key interest rate as is for the foreseeable future.
