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Growth is on course to moderate to slightly below 2% by 2020, with consumption slowing in response to smaller increases in housing wealth, and employment and exports moderating as US growth declines. Unemployment is projected to remain near record lows and inflation to edge up to slightly over 2%.
The Bank of Canada is projected to continue withdrawing monetary stimulus to stabilise inflation around the mid-point of its 1-3% medium-term target band. While fiscal policy is projected to remain neutral, reducing the structural budget deficit would ease the burden on monetary policy and create more room to support the economy in the event of an unexpected downturn. Macro-prudential policies have been tightened and housing markets are stabilising. The government should monitor the effects of recent tightening, especially the prevalence of highly indebted borrowers, and act if it does not decline significantly.
Source: Teranet and National Bank of Canada, House Price Index; and Statistics Canada.
1. Percentage of firms reporting more intense capacity pressures (or labour shortages) minus the percentage of firms reporting less, compared with 12 months ago.
2. Median of hourly wage growth measures from the Labour Force Survey, National Accounts, Productivity Accounts, and Survey of Employment, Payrolls and Hours.
3. Average of the Bank of Canada's three preferred core inflation measures (CPI-trim, median and common).
Source: Bank of Canada (2018), Business Outlook Survey; Bank of Canada (2018), Monetary Policy Report, July; and Statistics Canada, Tables 18-10-0006-01 and 18-10-0256-01.
Economic Survey of Canada (survey page)