Midyear 2026 Outlook: Resilience, AI, and Evolving Market Dynamics

Fed Chair Kevin Warsh testifies before the Senate Banking Committee.

The Canadian economy has been adjusting to US tariffs and continued uncertainty about the review of the Canada‑United States‑Mexico Agreement, as well as slower population growth. Business investment has been roughly flat, exports and housing activity have declined and economic growth has been uneven. As a result, the level of gross domestic product was roughly unchanged from the first quarter of 2025 to the first quarter of 2026. The unemployment rate has generally fluctuated between 6½% and 7%, pointing to excess supply in the economy. Consumer price index inflation in Canada was close to the 2% target for more than a year and a half until the war in the Middle East began. The hostilities caused global oil prices to spike, pushing up gasoline prices. Inflation rose to 3.2% in May. However, inflation excluding gasoline, as well as measures of core inflation, stayed close to 2%. This suggests that, so far, spillovers to the prices of other goods and services remain contained. Canadian businesses are adapting to elevated geopolitical uncertainty stemming from US trade policy and developments in the Middle East. Despite some volatility, recent data suggest that the economy is evolving broadly in line with the outlook in the April Rep Bank of Canada sees 2026 growth at 0.7% (vs 1.2% in April MPR), sees 1.8% growth in 2027 (vs 1.6%), 1.8% in 2028 (vs 1.7%). BoC: Inflation to average 2.5% in 2026 (vs 2.3% in April), 2.0% in 2027 (vs 2.1%), 2.1% in 2028 (vs 2.0%). Just in | The Bank of Canada maintains its nominal neutral interest rate estimate at the midpoint of 2.25% to 3.25%, consistent with April's assessment.

Iran Parliament Speaker Ghalibaf: Iran To Use Diplomacy Alongside Defense Stance - IRIB - Iran Must Be Ready For War To Protect Interests pic.twitter.com/sM0W4Boc9N Iran's Parliament Speaker Ghalibaf: No reason to honour MOU if it brings no benefit.