{"id":6582,"date":"2026-01-14T14:46:10","date_gmt":"2026-01-14T14:46:10","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=6582"},"modified":"2026-04-02T23:45:44","modified_gmt":"2026-04-02T23:45:44","slug":"steady-as-she-goes-central-banks-hold-the-line-in-2026","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/financial-markets-monthly\/steady-as-she-goes-central-banks-hold-the-line-in-2026\/","title":{"rendered":"Steady as she goes\u2013central banks hold the line in 2026"},"content":{"rendered":"\n
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Highlights:<\/strong><\/h4>\n\n\n\n
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Demographics reshape Canada’s growth story:<\/strong> Zero population growth in 2026 means GDP will expand at a slower rate this year, driven entirely by per-capita improvements after past central bank rate cuts\u2014a meaningful departure from prior year trends.<\/p>\n<\/div>\n<\/div>\n\n\n\n

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U.S. forecasts see challenges: <\/strong>Upside GDP surprises in 2025 came despite labour market softening, implying productivity gains\u2014not job creation\u2014fuelled economic expansion. The sustainability of those gains, among many other uncertainties are obscuring the outlook.<\/p>\n<\/div>\n<\/div>\n\n\n\n

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Central banks to hold steady:<\/strong> We expect both the Bank of Canada and Federal Reserve to keep interest rates unchanged in 2026 with Canada\u2019s rates at neutral levels and U.S. rates still slightly restrictive. <\/p>\n<\/div>\n<\/div>\n\n\n\n

Issue in focus:<\/strong><\/h4>\n\n\n\n
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Immigration caps and an aging population are stalling labour force expansion in Canada and the U.S. Consequently, fewer new jobs are needed every month to keep the unemployment rate steady. We zoom in on our break-even employment estimates as benchmarks for accessing the health of the labour market.  <\/p>\n<\/div>\n<\/div>\n\n\n\n

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Forecast changes:<\/h3>\n\n\n\n

Demographic shifts may prove a bigger focal point for our Canada economic forecast than trade<\/h4>\n\n\n\n

Canada will experience zero population growth in 2026 for the first time on record dating back to the 1950s due to the government\u2019s pivot on immigration policy. This leaves headline GDP growth driven solely by per-capita improvements. After a turnaround in 2025, we expect per-capita GDP will growth faster this year, supported by central bank easing in the past.<\/p>\n\n\n\n

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Globally, geopolitical tensions are dominating headlines and dampening sentiment, though their near-term impact on our forecast is likely minimal. U.S. operations in Venezuela, for example, cannot meaningfully improve oil production in 2026 given decades of infrastructure deterioration that will require sustained large-scale investment and operational stability to reverse.<\/p>\n\n\n\n

Overall, our outlook for Canada is little changed from a month ago. We continue to expect GDP growth will soften from 2025 to 2026 as population increase slows to a crawl, but that will mask a strengthening backdrop better observed through rising real per-capita GDP growth, a gradually declining unemployment rate and broadly steady (but still above-target) core consumer inflation.<\/p>\n\n\n\n

More specifically:<\/p>\n\n\n\n