Earlier interest rate cuts are yet to have much effect on the Canadian economy, which remains trapped in a period of below-potential growth. Making matters worse, any boost to the economy from lower borrowing costs next year will be countered by a decline in population, as new immigration curbs take effect. Therefore, we expect soft GDP growth of 1.5% in 2025 and 1.7% in 2026. We expect the Bank to cut its policy rate at each meeting until it reaches 2.00% by the middle of next year.
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