The future of trade relations is at the heart of the outlook for the Canadian economy, according to the Bank of Canada’s latest survey of market participants.
The central bank issued the results of its second-quarter survey, conducted from June 11 to 18 with 26 financial market players, on Monday.
The median GDP growth forecast for 2026 was 1.3%, rising to 1.9% for 2027, in the latest survey.
The trajectory of trade tensions was cited as both the top upside risk to the forecast, and the top downside risk.
According to the survey, 92% of respondents cited easing trade tensions as an upside risk, while the provision of larger-than-expected fiscal stimulus ranked second, cited by 58%. Three other possibilities — declining geopolitical risks, stronger consumer spending and a stronger housing markets — were tied for third place (31%).
Conversely, the top downside risk was the prospect of increased trade tensions, which was flagged by 96% of respondents.
Tightening global financial conditions ranked second, cited by 65% of respondents, followed by intensifying geopolitical risks, named by 42% of respondents.
The survey noted that 40% of respondents said that the balance of risks to their forecast was skewed to the higher side, while 32% see the risks as balanced, and 28% see the balance of risks trending to lower side.
Against that backdrop, the survey also indicated that the median forecast for the Bank of Canada’s policy rate is for rates to stay at 2.25%, before edging up to 2.5% in the second quarter of 2027, and 2.75% by the third quarter.
The median forecast for inflation this year was 2.6%, easing to 2.1% next year.