Bank revises GDP projections higher for both economies while maintaining steady rate outlooks amid productivity gains and moderating inflation.
RBC raised its Q2 Canadian GDP tracking estimate to 2.2% annualized from 1.7%, citing resilient household spending, recovering business investment, and net trade contributions. The 2026 annual growth forecast edged up to 0.7% from 0.6%, reflecting modest improvement despite shifting immigration trends.
The Bank of Canada is expected to hold rates at 2.25% through 2026, with gradual hikes projected for 2027. RBC noted persistent unemployment and fading oil-driven inflation pressures as key factors supporting a neutral policy stance. Wednesday’s meeting is anticipated to be uneventful.
US growth forecasts were upgraded more significantly, with 2.2% GDP growth projected for 2026 and 2027, driven by labor productivity gains exceeding 2.5% annualized since early 2024. The Fed’s funds rate is maintained at 3.5-3.75% through 2027, though risks to the outlook remain balanced.