Key forecast calls for 2018

Although the economy probably grew by 3% in 2017, the gains were overly-dependent on the heavily indebted household sector. That was possible when interest rates were near record lows and home values were inflating rapidly. But with higher borrowing costs and the housing boom at an end, we expect GDP growth to slow to 1.5% in 2018. Core inflation will stay below the 2% target. The Bank of Canada will become more cautious, before eventually cutting interest rates, from 1.00%, to 0.50% in the second half of 2018. Even if NAFTA survives, the Canadian dollar will drop lower, to US$0.75.