The summary of the quarterly projections from the Bank of Canada

<p>The summary of the quarterly projections for Canada from the Monetary Policy Report shows:</p><p>Looking at the prior report,</p><p>CPI for 2024 sees a rise to 2.5%. In the last report, the expectation was 2.4% In 2025, the inflation rate is expected to dip to 2.1%. That is unchanged from the last report's estimate. </p><p>For real GDP YOY, 2024 growth is seen at 1.6% vs 1.3% in the last report. In 2025, the expectations is for 2.7% which is down from 3.0% from the last reports estimate.</p><p>A overview of the MPR from the BOC:</p><ul><li>Global economy is slowing down but is stronger than expected, especially due to the US economy's performance.</li><li>Growth is predicted to moderate further in 2024.</li><li>Inflation is decreasing in most major economies and is expected to continue declining towards central banks' targets.</li><li>In Canada, Consumer Price Index (CPI) inflation is high but gradually easing.</li><li>Monetary policy in Canada is effectively moderating spending and reducing price pressures in various sectors, though shelter price inflation remains high.</li><li>Canada experienced stalled economic growth in mid-2023, leading to a situation where supply has caught up with demand, creating modest excess supply.</li><li>Labour market conditions in Canada are improving, but wage growth remains around 4% to 5%.</li><li>Forecast for 2024 in Canada includes weak economic activity in Q1, followed by gradual improvement, with GDP growth just under 1%. Government spending significantly contributes to this growth.</li><li>GDP growth in Canada is projected to increase to about 2.5% in 2025.</li><li>Inflation in Canada is expected to be around 3% in the first half of 2024, decreasing to 2.5% in the second half, and returning to target in 2025.</li><li>The economic outlook remains uncertain, although it aligns largely with projections from the October Report.</li><li>Risks to inflation outlook are considered balanced, but there is concern about persistent underlying inflation and the potential for it to remain above target longer than expected.</li></ul><p>On the Canadian economy, the BOC says:</p><ul><li>CPI inflation in Canada eased to 3.3% in Q4 2023.</li><li>Monetary policy is effectively slowing growth and reducing excess demand pressures on inflation.</li><li>Inflation remains high, with continued strong inflation in shelter and food prices.</li><li>Economic growth is expected to be close to zero through Q1 2024, then gradually pick up.</li><li>Past interest rate increases and recent easing in financial conditions are influencing this economic trend.</li><li>Inflation is expected to stay close to 3% in the first half of 2024, then gradually ease and return to the 2% target by 2025.</li><li>There is considerable uncertainty about the rate of future inflation decreases.</li><li>The economic slowdown should reduce inflationary pressures, but there are concerns about other factors potentially keeping inflation above the target for longer than expected.</li></ul>

This article was written by Greg Michalowski at

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