1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 48
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
CANADA
Derek Holt
Vice President, Scotiabank
Economics
Walid Khalid
Director, Investment
Strategy
Latest
2025f
2026f
2027f
GDP Growth
2.6%
1.7%
1.5%
1.8%
Inflation
2.2%
2.1%
2.2%
2.0%
Unemployment
6.5%
6.8%
6.4%
6.0%
Budget Bal.
-2.0%
-2.4%
-2.0%
-1.8%
Latest
2025
1-yr fwd
2-yr fwd
3-mo yield
2.2%
2.2%
2.8%
3.0%
10-yr yield
3.4%
3.4%
3.6%
3.8%
Yield curve slope
1.2%
1.2%
0.8%
0.8%
Source: Bloomberg Finance LP, Scotiabank Economics, Scotia Wealth Management. "Latest" values are as at December 31, 2025 and, for data other than bond
yields, pertain to the most recent monthly, quarterly, or annual reading available on this date. | Forecasts are based on Scotiabank Economics forecasts dated
December 11, 2025 | 2025 inflation and unemployment are based on the average YoY rates for each month of the year. | 2025 yields are as at December 31, 2025.
Forward periods are relative to December 31, 2025 and are based on forward market pricing
Key conclusions
•
Near-term economic growth outcomes will be influenced by the effectiveness of
government policies aimed at stimulating business investment, the impact of
low/negative population growth, and the outcome of the USMCA review and any
associated uncertainties that come with it.
•
Waning population growth could pose a headwind to aggregate consumption ahead, but
lower labour supply may reduce the breakeven pace of hiring required to keep the
employment rate steady.
•
Upward revisions to Canada’s economic accounts have resulted in less slack in the
economy than previously thought. This, along with elevated core inflation and the recent
string of strong headline job gains have likely raised the bar for further monetary easing.
•
We believe the BoC will remain in an extended holding pattern for the next several
meetings, with the potential for a couple of hikes in the back half of 2026.
Canada’s economy remains on a moderating path. Growth is slowing but still positive, even as
trade frictions with the country’s largest trading partner continue to weigh on exports. Interest
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