RBC Economics has updated its economic projections for both Canada and the United States, reflecting evolving market conditions and recent data. For Canada, the bank increased its second-quarter annualized Gross Domestic Product (GDP) tracking estimate to 2.2% from an earlier 1.7%. This upward revision follows two quarters of minimal growth, primarily driven by sustained consumer expenditure, a rebound in corporate investment, and a projected positive contribution from international trade. Despite a challenging environment for household purchasing power due to gasoline prices, consumer resilience has been notable. The annual GDP growth forecast for Canada in 2026 also saw a slight uptick to 0.7% from 0.6%, a modest improvement in a nation experiencing shifts in immigration patterns.
Regarding monetary policy, RBC maintains its expectation that the Bank of Canada (BoC) will keep its policy rate at 2.25% through 2026, with potential moderate increases anticipated in 2027. This stance is predicated on the unemployment rate, which, despite recent improvements, remains elevated. Consequently, a policy rate positioned at the lower end of the neutral range is deemed appropriate. With economic growth stabilizing and concerns regarding oil-driven inflation subsiding, the immediate future is seen as presenting reduced two-way risks for interest rates. The upcoming BoC meeting is largely expected to result in no change to current policy.
US Economic Outlook and Productivity Trends
The economic narrative for the United States presents a more structurally driven upgrade. RBC highlights that US labor productivity has consistently exceeded an annualized rate of 2.5% since the beginning of 2024. This robust productivity growth has led RBC to elevate its GDP and potential GDP forecasts for the US economy. This structural improvement suggests a more entrenched positive trend in the American economic landscape, differentiating it from the Canadian outlook which relies more on cyclical factors.
For retail forex and CFD traders, these economic assessments from institutions like RBC can offer valuable insights into potential shifts in currency valuations. Expectations for central bank policy rates, in particular, often influence the strength or weakness of a national currency against its peers. Understanding these underlying economic drivers can help inform trading strategies, especially for pairs involving CAD and USD.
Overall, RBC's updated forecasts indicate a cautiously optimistic view on North American economic growth, with a stable outlook for central bank interest rates in the near to medium term, particularly for Canada, while the US benefits from stronger productivity trends.
📰 Based on reporting from: ForexLive →