Canada’s central bank has downgraded its outlook for economic growth in 2026, warning that unemployment remains stubbornly high and business spending continues to soften amid rising global uncertainty.Bank of Canada Governor Tiff Macklem said the latest forecast reflects an unusually volatile environment, citing geopolitical tensions and shifting trade dynamics. “Uncertainty around our forecast is unusually high,” Macklem told reporters. “There are a number of risks and uncertainties.”Blacklock's Reporter said just one year ago, the Bank projected the economy would grow by an average of 1.8% in 2026. That outlook was lowered to 1.4% in an October update and was cut again yesterday to 1.1%.Asked what had changed since the fall, Macklem pointed to mounting global risks. “There’s a sense that geopolitical risks are heightened,” he said. “The month of January has been pretty packed.”Macklem also suggested Canada is entering a new trade reality with its largest trading partner. “It’s pretty clear the days of open, rules-based trade with the United States are over,” he said, adding Canada will need to adapt despite the negative economic consequences..The bank’s latest Monetary Policy Report highlighted continued weakness in the labour market. The unemployment rate remains elevated at 6.8%, with youth unemployment still particularly high despite modest recent improvement. Job vacancies have fallen to their lowest level since October 2017, while hiring intentions among businesses remain weak.Economic growth heading into January was estimated to be close to zero, according to the report. The slowdown was attributed in part to reduced business inventory spending as companies scale back stockpiling amid uncertainty.“United States trade policy remains unpredictable,” Macklem said, noting the range of possible economic outcomes is wider than usual.The bank held its key overnight interest rate steady at 2.5%. Its next rate decision is scheduled for March 18.The downgraded outlook comes as Prime Minister Mark Carney has said he is relying on economic growth to fulfill election promises, including income tax cuts and higher military spending. Speaking last June, Carney said his government would avoid forcing Canadians to make trade-offs. “We’re not at sacrifices in order to do those,” he said.
