The Bank of Canada has released the results of its Market Participants Survey for the second quarter of 2025, which reflects views from about 30 financial market participants collected between June 25 and July 3, 2025.
Respondents forecast a median real GDP growth rate in Canada of 0.8% by the end of 2025 and 1.8% by the end of 2026. Most participants assigned a higher probability to GDP growth remaining between 0.01% and 2.00% over both years, with only a small chance that growth would exceed 3%.
When asked about risks to economic growth, easing trade tensions and larger-than-expected fiscal stimulus were identified as top upside risks by nearly nine out of ten respondents. A stronger housing market was also noted as a potential positive factor but by fewer participants. On the downside, an increase in trade tensions was seen as the leading risk (89%), followed by concerns about weaker consumer spending and a weaker housing market.
Regarding current output levels, most respondents (84.6%) believe Canadian GDP is below its potential, while none considered it above potential output.
Survey participants estimated the probability of Canada entering a recession within six months at a median of 35%, declining to a median of 20% for an 18- to 24-month horizon. A recession was defined as two consecutive quarters of negative real GDP growth.
For inflation expectations, the median forecast for annual total CPI inflation is projected at 2.2% at year-end 2025 and returning to the Bank’s target range with a median estimate of 2.0% for both year-end 2026 and five years ahead.
Most respondents expect annual CPI inflation to fall between 1.01% and 3.00% through both years surveyed.
In terms of monetary policy, forecasts indicate that most expect the Bank of Canada’s policy interest rate to decrease gradually from a median level of 2.75% in July to around 2.25% by December and into subsequent quarters in early- to mid-2026.
Views on interest rate risks were mixed: “Skewed to a higher path” was selected by roughly four in ten respondents; about one-third thought risks were skewed lower; just under one-quarter described risks as broadly balanced.
Estimates for the long-term nominal neutral interest rate—a level neither stimulating nor restraining economic activity—centered on a median response of 2.75%.
On financial assets, point estimates suggest Canadian government bond yields are expected to remain stable or rise slightly through late-2025 into late-2026 across various maturities (two-year yields with medians near or slightly above current levels), while oil prices (West Texas Intermediate) are anticipated around US$65 per barrel at year-end, rising marginally next year. The Canadian dollar is forecast at US$0.74–US$0.76 over this period.
The full survey data can be found on the Bank’s website.
