The Bank of Canada's annual economic growth forecast is overly optimistic, economists said, and another large interest rate cut this year will likely be required to boost growth. Economists widely expected the BoC to lower its annual gross domestic product (GDP) forecast when it released its quarterly monetary policy report on Wednesday,

The bank expects economic activity to increase gradually as interest rates fall. Its new forecast sees Canadian output growing 2.1 per cent in 2025 and 2.3 per cent in 2026, up from 1.2 per cent in 2024. Per capita GDP growth is expected to turn positive next year.

The Bank of Canada is likely to make a jumbo cut to interest rates, acknowledging that borrowing costs should fall more quickly as inflation wanes and economic growth stagnates.