TD Economics’ latest forecast maps a subdued path for growth, inflation and rates
Canadian mortgage professionals face a long, slow adjustment rather than a sharp turning point, according to a new long‑term forecast from TD Economics that projects below‑trend growth, subdued consumer demand and a drifting Canadian dollar over the next several years.
The report, authored by directors Thomas Feltmate and Andrew Hencic, placed much of the drag on slower population growth and persistent trade frictions, even as interest rate cuts earlier in the cycle have helped support spending and housing.
Statistics Canada estimated the population at 41.58 million as of October 1, down roughly 76,000 people, or 0.2%, from July 1.
The drop followed almost a year of flat growth after the record expansion of 2022-23, when temporary residents helped push the population up by nearly 1.3 million in a single year.
TD’s view aligned with their recent report on uneven housing recovery across provinces and a market still wrestling with affordability and policy uncertainty.
“Canadian economic growth is expected to run below trend through 2026 and into 2027,” Feltmate and Hencic said. “Output is held back by slower population growth and the impact of tariffs on export demand and business and consumer sentiment.”
“Consumer spending had been improving on lower interest rates,” they said, “but we expect this to slow as the unemployment rate moves above its long‑run level until late 2027.”
On inflation, the economists noted that headline price growth has essentially reached the Bank of Canada’s 2% target, even as core measures remain near the top of the bank’s range.
“Looking ahead, sub‑par economic growth and Canada’s removal of many retaliatory tariffs should see core inflation return to target,” they said.
TD’s base case saw the Bank of Canada holding its policy rate at an estimated neutral level of 2.25% through the forecast horizon “as economic growth returns to its trend pace.”
Tiff Macklem, governor of the Bank of Canada, says the benchmark rate at 2.25% is “about the right level” to support modest growth while keeping inflation near target, despite trade-related uncertainties. https://t.co/S6UDcxRehn
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 17, 2025
For housing, the outlook implies modest support rather than a surge. Earlier TD work pointed to “subdued sales and price growth for much of 2025” as weaker labour markets and uncertainty weighed on demand, with some provinces expected to outperform on the back of tighter supply and relatively better affordability.
At the same time, TD’s new forecast expects the Canadian dollar to “return to the 74–75 U.S. cent range as interest rate differentials narrow between Canada and the U.S.”
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