In a speech overnight, BoC Governor Tiff Macklem said Canada is undergoing profound structural change, driven by the end of open trade with the US, rapid advances in artificial intelligence, and slower population growth due to aging and lower immigration. These forces, he said, are reshaping the economy in ways that will have lasting implications.
Macklem cautioned that when structural change accelerates, disruption is inevitable. While such transitions can strengthen the economy over time, they also heighten uncertainty for businesses and households, as the full effects are difficult to predict and unevenly distributed.
Against that backdrop, the BoC expects modest economic growth over the next couple of years, with inflation staying close to the 2% target. Part of the softness reflects temporary weakness from the trade conflict, but the outlook also incorporates the adjustment costs associated with deeper structural shifts.
Monetary policy, Macklem emphasized, “will not be at the centre” of managing this transition. Instead, the BoC will play a supporting role by anchoring inflation and helping the economy navigate a period of elevated uncertainty, while remaining alert to risks and prepared to adjust policy if the outlook changes.
