Major bank economists give their views ahead of official data release
Economists from three major banks say Canada’s inflation pulse has likely cooled further, even as consumers continue to spend.
With the latest CPI data due today (Jan. 19) WP has been looking at what the economists believe will be the direction of travel for inflation.
Nathan Janzen and Abbey Xu at RBC Economics expect the upcoming CPI report to show another month of moderating inflation, helped by cheaper gasoline which fell 5% from September. Core measures are forecast to hold roughly around the three per cent mark on a year-over-year basis, reinforcing the view that underlying inflation is easing but not yet back at the Bank of Canada’s 2% target.
RBC’s duo also points to mixed signals on the consumer side with official data showing retail sales slipped late in the third quarter, but still maintained positive momentum on a volume basis, broadly matching the bank’s own cardholder data, which highlight “consumer resilience despite ongoing moderation in spending patterns.”
A separate RBC card-spending tracker indicates “domestic purchases firming through the holiday shopping season,” underscoring that many households are still willing to spend despite higher borrowing costs.
BMO Economics’ Scott Anderson and Sal Guatieri argue that the demand backdrop remains sturdier than many expected at this stage of the cycle. Their article cautions investors to “never underestimate the consumers’ willingness and ability to spend.”
While they acknowledge the “tariff-driven rollercoaster that has impacted consumer confidence, they say that “the uptick in sentiment in recent months is consistent with our forecasts for a resilient consumer and 2.1% real consumer spending growth in 2026.”
Derek Holt at Scotiabank Economics is more downbeat on near-term output but still anticipates contained inflation. He says Canada’s economy is “tracking little growth” with fourth-quarter GDP running at about -1% annualized on an income and production basis. However, the bank’s CPI preview calls for headline inflation to fall by 0.4% month-over-month in unadjusted terms, leaving the annual rate steady at 2.2%, or roughly a 0.2% gain when seasonally adjusted.
The trio of views points to a landscape where inflation is edging lower, growth is subdued and consumers remain pivotal. Softer CPI readings could limit further rate hikes, but steady spending may also keep central bankers cautious. That mix argues for careful duration decisions, close attention to household-credit exposures and selective opportunities in consumer-facing equities that can navigate slower, but still supported, demand.
