{"id":433671,"date":"2026-07-14T21:07:37","date_gmt":"2026-07-14T14:07:37","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/rbc-bumps-up-canadian-and-us-growth-forecasts-sees-fed-and-boc-frozen-through-2026-433671\/"},"modified":"2026-07-14T21:07:37","modified_gmt":"2026-07-14T14:07:37","slug":"rbc-bumps-up-canadian-and-us-growth-forecasts-sees-fed-and-boc-frozen-through-2026","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/rbc-bumps-up-canadian-and-us-growth-forecasts-sees-fed-and-boc-frozen-through-2026-433671\/","title":{"rendered":"RBC bumps up Canadian and US growth forecasts, sees Fed and BoC frozen through 2026"},"content":{"rendered":"
\n

RBC raised its Q2 Canadian GDP tracking estimate to 2.2% annualized from 1.7% previously. After two quarters of stagnation, the drivers are the usual suspects: resilient household spending (impressive given what gasoline prices did to buying power this spring), recovering business investment, and net trade set to add significantly. The annual 2026 number edges up to 0.7% from 0.6%, which isn’t impressive but it’s an uptick in the right direction in a country that’s reversing immigration flows.<\/p>\n

The Bank of Canada call is unchanged: on hold at 2.25% through 2026, then moderate hikes in 2027. RBC’s thinking is that the unemployment rate is still high despite recent improvement, so a policy rate at the lower end of neutral remains appropriate. With growth firming and oil-driven inflation worries fading (though maybe not for long), they see less two-way risk on rates in the near term. They think Wednesday’s meeting will be a non-event.<\/p>\n

The US story is more interesting<\/p>\n

In contrast, they seen an American growht upgrade as structural. They highlight that labour productivity has been running above a 2.5% annualized clip since the start of 2024, and RBC has lifted GDP and potential GDP through 2027. They see 2.2% growth in both 2026 and 2027 \u2014 driven by productivity. I suspect that could further compound in the following years as AI investments pay off.<\/p>\n

The Fed side is where the tension lives. RBC keeps the funds rate at 3.5-3.75% through the end of 2027, but the risk language has clearly shifted. Core inflation is running well above target even stripping out energy, unemployment is historically low, and the June dot plot was tighter. Today’s CPI report will strengthen RBC’s resolve on the call.<\/p>\n

RBC also flags the obvious risk: if non-energy inflation flares while unemployment stays low, Fed funds may not be restrictive enough, and the next move debate becomes about hikes. Under the hood, they have US 2-year yields grinding up toward 4.35-4.45% through 2027 from 4.18% today. <\/p>\n

USMCA Risks<\/p>\n

July 1 came and went without a formal extension of CUSMA, and the market shrugged \u2014 correctly, in RBC’s view. The deal doesn’t mechanically expire until 2036, and negotiations on extending that deadline have begun.<\/p>\n

\n

“Businesses seeking immediate resolutions will be disappointed”<\/p>\n<\/p>\n

In any case, RBC estimates only about a third of Canadian exports to the US would face a 10% tariff if USMCA lapsed \u2014 not the full ~90% currently exempt \u2014 because other exemptions have expanded and the replacement tariff rate has trended lower. The tail risk has shrunk.<\/p>\n

This is where I differ from RBC. I think businesses are slowly getting more comfortable with the tariff uncertainty and there could be a wave of business investment that leads to futher upgrades to Canadian growth.<\/p>\n

Central bank roundup<\/p>\n