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Slower growth since the second half of 2017 is projected to give way to growth of over 2% from mid-2018. The uplift will be export-led, reflecting gradual restoration of oil pipeline capacity and strong US growth. Business investment is projected to strengthen to ease tightening capacity constraints. Unemployment should decline further to record lows.
The Bank of Canada is projected to gradually withdraw monetary stimulus, and the inflation rate is set to remain slightly above 2%. Further rate increases will be required to meet the Bank’s (medium-term) inflation target. Fiscal policy is also projected to tighten somewhat, creating room to support the economy during the next downturn and reducing the extent to which interest rates need to rise. Macro-prudential policy has been gradually tightened, and there are signs that housing markets are stabilising. Nevertheless, further adjustments may prove necessary should the balance of risks change. Government funding for childcare should be increased further in a fiscally neutral way to raise female employment, reduce the gender earnings gap and make growth more inclusive.
Economic Survey of Canada (survey page)