Canada's Soft Economy Could Limit Interest Rate Hikes, Economists Warn

The Bank of Canada's interest rate hikes may be limited due to a soft economy, according to Capital Economics. The report suggests that trade uncertainty and slowing immigration levels will hold back growth prospects.

Capital Economics expects real gross domestic product to rise just 1.5 per cent next year before normalizing to two per cent in 2028 as infrastructure and artificial intelligence projects gain steam.

The central bank has been monitoring the impact of the U.S. trade dispute and war in Iran on its outlook, and has kept the benchmark interest rate at 2.25 per cent for all of this year.