Bank of Canada says growth to stall through the middle of 2023

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Canada’s economy will grow 1% this year, compared to an October forecast of 0.9%, it said in its quarterly Monetary Policy Report. Inflation is seen on average at 3.6% this year, compared with the previous forecast of 4.1%.

Stalling growth during the first half means “the likelihood of a couple of quarters with slightly negative growth is roughly the same as that of a couple of quarters with slightly positive growth,” it said.

In 2022, the economy likely expanded by 3.6%, compared with a previous forecast of 3.3%, and expanding 1.8% next year, lower than the 2% previously forecast.

Average inflation next year is expected to be 2.3%, slightly higher than the October forecast of 2.2%.

The bank separately increased its overnight policy rate by a quarter of a percentage point to 4.5% and indicated it would likely pause there to monitor the impact of previous rate hikes.

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