Bank of Canada reworks MPR to offer two different tariff scenarios ...Middle East

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Bank of Canada reworks MPR to offer two different tariff scenarios

Rather than providing a traditional base-case projection, the Bank of Canada has presented two illustrative scenarios to account for the uncertainty around US trade policy.

The Bank of Canada had previously signaled it would revise down its 2025 GDP forecasts, and indeed, in Scenario 1 (where most tariffs are eventually negotiated away), growth is projected at 1.6% for 2025, down from previous estimates at 1.8%. In the more severe Scenario 2 ("A long-lasting global trade war"), 2025 GDP growth could fall to just 0.8%.

    Scenario 1:

    2024: 1.5%2025: 1.6%2026: 1.4%2027: 1.7%

    Scenario 2:

    2024: 1.5%2025: 0.8%2026: -0.2%2027: 1.6%

    The numbers here mask some of the weakness as they would see a four-quarter recession with a 1.2% decline in GDP in the back half of 2025 and first half of 2026.

    CPI inflation:

    Scenario 1:

    2024: 2.4%2025: 1.8%2026: 2.0%2027: 2.1%

    Scenario 2:

    2024: 2.4%2025: 2.0%2026: 2.7%2027: 2.0%

    The

    This article was written by Adam Button at www.forexlive.com.

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