Bank of Canada Governor Tiff Macklem stated on the 15th that the Canadian economy is resuming growth as consumer resilience returns, while inflation shows signs of gradual easing. Speaking at a press conference after the regular monetary policy meeting, Macklem noted that economic growth, which had stagnated over the past year, appears to have restarted, with consumer spending maintaining resilience and businesses adapting despite US trade policy acting as a headwind. According to the BOC, last year's GDP growth rate was flat as the economy adapted to new tariff introductions, high uncertainty, and slowing population growth, with the economy still in an excess supply state and the labor market showing weakness within a 6.5-7% unemployment rate range.
BOC Estimates Q2 GDP Growth Rebounded to 2.5%
Macklem stated that Q2 GDP growth is estimated to have rebounded to 2.5%. He diagnosed that while this rebound primarily reflects the resolution of temporary factors, the drivers of economic growth also appear to be diversifying. Recent indicators point to continued robustness in consumer spending, according to Macklem. He noted that stagnant housing market activity is stabilizing, and export growth, though on a lower path than previous forecasts, is expected to strengthen continuously going forward. Macklem said that overall, the growth outlook is similar to the April forecast, but data obtained since April has reinforced confidence that the Canadian economy is actually navigating this period of global upheaval well.
Macklem Projects Inflation to Return to 2% Target in Early 2027
Regarding inflation, Macklem assessed that Canadian inflation is ready to ease gradually, assuming global oil prices decline from high levels. The BOC analyzed that the Consumer Price Index (CPI) rose to 3.2% in May primarily due to gasoline price increases linked to the Middle East conflict, but so far there are no signs of high oil prices broadly transmitting to other sectors. Macklem stated that while war-related cost pressures are still affecting some consumer prices, downward pressure on other prices is offsetting them. He projected that inflation will remain at high levels in June before gradually moderating over the coming months and returning to the 2% target in early 2027. This forecast heavily depends on the path of oil and gasoline prices and assumes oil prices will stabilize in the $70-75 per barrel range, Macklem explained. He emphasized that while the BOC has been closely monitoring the direct effects of high oil prices on inflation, the longer high oil prices persist, the greater the risk of transmission to other goods and services, stating "we will not let this go unchecked."
Middle East Conflict and Trade Negotiations Pose Major Risks
Macklem identified that the Middle East conflict has intensified again in recent days, and Canada-US trade negotiations are currently ongoing. He stated these two factors pose the greatest risks to the forecast, with uncertainty remaining at high levels. Macklem concluded that the BOC will continuously assess the fundamental strength of the Canadian economy and the inflation outlook, and is prepared to adjust monetary policy as needed.
FAQ
What did BOC Governor Macklem say about Canadian economic growth on the 15th?
Macklem stated at a press conference after the monetary policy meeting on the 15th that Canadian economic growth, which had stagnated over the past year, appears to have restarted, with consumer spending maintaining resilience and businesses adapting despite US trade policy headwinds. He noted Q2 GDP growth is estimated to have rebounded to 2.5%.
When does the BOC expect inflation to return to the 2% target?
Macklem projected that inflation will remain high in June before gradually moderating over the coming months and returning to the 2% target in early 2027. This forecast assumes oil prices will stabilize in the $70-75 per barrel range.
