Canada's Economy to Limit Rate Hikes, Economists Warn

The Bank of Canada's potential interest rate hikes may be limited by a soft economy, according to a report from Capital Economics.

Trade uncertainty and slowing immigration levels could hold back inflation in the near-term, the report argues.

Capital Economics expects real gross domestic product to rise just 1.5% next year, but normalize to 2% in 2028 as infrastructure and AI projects gain steam.

The Bank of Canada has held its benchmark interest rate at 2.25% for all of 2026 as it gauges the impact of trade disputes and other global events on its outlook.