2027 to 2028 Forecast: Where Interest Rates and Growth Are Headed Over the Next Two Years

Most market commentary focuses on the next announcement. That's useful if you're closing a deal next month. It's less useful if you're an investor or developer thinking in multi year timelines. So here's the longer view, straight from the Bank of Canada's own July projection.

The growth path

GDP growth for all of 2026 is projected at a modest 0.7 percent, weighed down by the weak start to the year. The Bank then projects 1.8 percent growth in both 2027 and 2028, a meaningful step up. Exports are expected to be the biggest contributor to that acceleration as businesses adjust to the current trade environment, with consumer spending and government spending remaining steady contributors alongside them.

Business investment is expected to strengthen too, initially led by oil and gas as elevated prices support activity there, then broadening into other sectors as trade related uncertainty gradually eases through the projection window.

The inflation path

Inflation is projected to return to around 2 percent by early 2027 and stay close to that target through 2028. There's expected to be some month to month volatility in the year over year numbers due to base year effects, essentially statistical noise from comparing against an unusual prior year, so don't read too much into any single month during that period.

What this implies for the rate environment

The Bank sets its policy rate based on where it expects inflation and growth to land, not where they sit today. If their own projection holds, a scenario of moderate, strengthening growth alongside inflation sitting near target is generally the kind of environment associated with a stable to gradually normalizing rate environment, rather than aggressive moves in either direction.

That's not a promise. The Bank was explicit that this whole outlook is highly dependent on two things: how the Canada US trade relationship evolves, and how the war in the Middle East unfolds. Either one could shift this picture materially.

What this means for planning further out

For land sales, commercial deals, and development timelines that run 18 to 36 months, this base case forecast, moderate growth acceleration, inflation returning to target, is a reasonably constructive backdrop to underwrite against, provided you're building in the two named risks as real sensitivities rather than footnotes.

If you're modelling a longer horizon project or investment and want to talk through how this forecast should inform your assumptions, that's exactly the kind of conversation I have regularly. Reach out.