The Bank of Canada is pointing to three big forces reshaping the economy: growing U.S. protectionism, rapid advances in artificial intelligence, and much slower population growth. Together, these changes are expected to weigh on growth for some time. The central bank is signalling that while the economy may eventually become more productive and resilient, that process will take years rather than months. For households already feeling stretched, that is a sobering message.
Many Canadians have been hoping for lower interest rates to ease mortgage payments and other borrowing costs. But the bank is clearly downplaying the chances of further rate cuts. After holding the benchmark rate at 2.25 per cent for a second straight meeting, it has suggested rates will stay where they are unless the economy delivers a major surprise. Markets are now expecting little movement through 2026.
The reasoning is that not all economic weakness is the same. If growth is slow because Canada’s productive capacity has been damaged by demographic shifts, cutting rates could do more harm than good. In that case, cheaper borrowing might fuel inflation later on or delay necessary changes in how businesses operate and invest. From a consumer’s perspective, this means relief on interest costs is unlikely to come quickly, even if growth remains sluggish.
The broader picture is not especially encouraging. Exports have fallen, unemployment remains elevated, and many businesses are delaying investment and hiring. Recent data shows economic growth has stalled and may have even slipped slightly at the end of last year. Looking ahead, the central bank expects GDP growth of just over 1 per cent in 2026 and only modest improvement the year after. Trade uncertainty and slower population growth are expected to continue acting as brakes on the economy.
At the same time, inflation is forecast to stay close to the 2 per cent target, which explains the bank’s cautious stance. Even with weak growth, there is still concern that inflation could flare up again if policy is too loose.
For ordinary Canadians, the takeaway is that the adjustment ahead will require patience and adaptation. The bank’s message is that governments, businesses and households all have a role to play. Rather than waiting for lower rates to solve the problem, Canada is being pushed to diversify trade, invest in new technologies, strengthen internal markets and lift productivity. How well the country responds to these challenges will shape living standards and job prospects for years to come.
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