How and why all the Bank of Canada forecasts changed in the latest MPR
Here are the changes in today’s MPR:
GDP growth (annual)
Essentially a wash on growth. The Bank explicitly states “the impact of higher global oil prices on economic activity is small." Government spending got revised up (provincial budgets), residential investment got revised down (affordability still biting). Net-zero.
CPI inflation (annual)
This is where the oil shock shows up. The 2026 inflation track is 30 bps higher, entirely on energy. The fuel excise tax suspension that kicked in last week provides a partial offset (10c per litre). Notably, the Bank thinks it gets back to target on the same timeline — early 2027 — which is … optimistic, particularly with Trump today talking about a multi-month Iran blockade.
Quarterly inflation path (year-over-year)
The Q4 2026 number is the tell. January had inflation dipping to 1.9% by year-end — comfortably below target, room to cut. April has it at 2.2% — above target through all of 2026. That’s a meaningful shift in the policy backdrop even if the annual averages look benign.
Core inflation
Core got revised slightly lower in the near term (good news on the underlying trend) but slightly higher for end-2027 — consistent with the Bank’s view that energy cost pass-through bleeds into the broader basket over time. Again, that’s optimistic given the backdrop.
Quarterly GDP path
Q1 2026 is tracking a touch softer than the January call. Nothing dramatic, but the soft handoff from a -0.6% Q4 2025 print (vs January’s flat call) means the Bank starts the year on weaker footing than it expected.
Tariff assumptions
The court ruling that struck down the IEEPA tariffs is the meaningful change here — replaced with the uniform 10% rate, which is lower than what was in place. Modest positive for global and Canadian growth.
Oil price assumptions
This is the big one. The 2027 oil assumption is US$15 higher than January, reflecting “a higher risk premium, strong demand to rebuild global inventories and a slow resumption of supply due to the war." Even after the war fades, the Bank doesn’t expect oil to round-trip back to pre-war levels. Spot brent is at $116.80 today.
Potential output
Growth in potential is a touch lower, but the level of potential output got revised up by roughly 1.0–1.4% — historical revisions to GDP and capital stock data, plus an assumed AI productivity boost of 0.2 percentage points per year. Implication: the output gap might be a bit wider than previously thought, which is mildly disinflationary at the margin.
This article was written by Adam Button at investinglive.com.