Downside growth risks to limit rate hikes

Trade uncertainty and lower immigration will limit GDP growth to 1.5% next year, keeping core inflation from drifting too far back above target. Accordingly, the Bank of Canada will only hike twice, to the midpoint of its 2.25% to 3.25% neutral range estimate, retaining the flexibility to cut into accommodative territory if CUSMA renegotiations sour. Beyond this, we expect the infrastructure drive and AI buildout to lift GDP growth back to its long-run average of 2% in 2028.