The summary of the quarterly projections for Canada from the Monetary Policy Report shows:
Looking at the prior report,
CPI for 2024 sees a rise to 2.5%. In the last report, the expectation was 2.4% In 2025, the inflation rate is expected to dip to 2.1%. That is unchanged from the last report's estimate.
For real GDP YOY, 2024 growth is seen at 1.6% vs 1.3% in the last report. In 2025, the expectations is for 2.7% which is down from 3.0% from the last reports estimate.
A overview of the MPR from the BOC:
- Global economy is slowing down but is stronger than expected, especially due to the US economy's performance.
- Growth is predicted to moderate further in 2024.
- Inflation is decreasing in most major economies and is expected to continue declining towards central banks' targets.
- In Canada, Consumer Price Index (CPI) inflation is high but gradually easing.
- Monetary policy in Canada is effectively moderating spending and reducing price pressures in various sectors, though shelter price inflation remains high.
- Canada experienced stalled economic growth in mid-2023, leading to a situation where supply has caught up with demand, creating modest excess supply.
- Labour market conditions in Canada are improving, but wage growth remains around 4% to 5%.
- Forecast for 2024 in Canada includes weak economic activity in Q1, followed by gradual improvement, with GDP growth just under 1%. Government spending significantly contributes to this growth.
- GDP growth in Canada is projected to increase to about 2.5% in 2025.
- Inflation in Canada is expected to be around 3% in the first half of 2024, decreasing to 2.5% in the second half, and returning to target in 2025.
- The economic outlook remains uncertain, although it aligns largely with projections from the October Report.
- Risks to inflation outlook are considered balanced, but there is concern about persistent underlying inflation and the potential for it to remain above target longer than expected.
On the Canadian economy, the BOC says:
- CPI inflation in Canada eased to 3.3% in Q4 2023.
- Monetary policy is effectively slowing growth and reducing excess demand pressures on inflation.
- Inflation remains high, with continued strong inflation in shelter and food prices.
- Economic growth is expected to be close to zero through Q1 2024, then gradually pick up.
- Past interest rate increases and recent easing in financial conditions are influencing this economic trend.
- Inflation is expected to stay close to 3% in the first half of 2024, then gradually ease and return to the 2% target by 2025.
- There is considerable uncertainty about the rate of future inflation decreases.
- The economic slowdown should reduce inflationary pressures, but there are concerns about other factors potentially keeping inflation above the target for longer than expected.
