If that forecast holds, it suggests the Bank may feel little urgency to either raise or cut rates. With inflation essentially hovering around target and the economy growing modestly, holding the policy rate near what many economists view as a neutral level – neither stimulative nor sharply restrictive – could prove the path of least resistance.
CUSMA uncertainty, but status quo still expected
Another key variable for Canada’s medium‑term outlook is the upcoming review of the Canada‑United States‑Mexico Agreement (CUSMA, known as USMCA south of the border), which will help define the North American trade relationship in the years ahead.
The deadline for that review is the beginning of July, with plenty of uncertainty still hovering over the economic outlook amid continuing tariffs and trade tensions between the US and Canada.
On that front, Guatieri anticipates a drawn‑out process rather than a swift resolution, meaning that lack of clarity will probably continue for a while yet.
“Our assumption there is that we see an annual review extend through this year, through next year, maybe even the year after, until they finally come to some agreement and renegotiate the USMCA,” he said. “We do not expect a quick review process that ends with a continuation of the agreement.”