The Bank of Canada’s third-quarter Market Participants Survey shows a slightly weaker economic outlook compared to earlier in the year.
Respondents now expect real GDP to grow 0.6% in 2025, down from 0.8% in the second-quarter survey. Most see growth landing in the 0% to 1% range, suggesting a cooler backdrop heading into next year. The outlook for 2026 also eased a touch, with the median forecast slipping to 1.7%.
Trade tensions remain front and centre, cited as the top downside risk by 90% of participants.
Concerns about softer consumer spending and a weaker housing market also ranked high, with nearly nine in 10 respondents believing the economy is operating below its potential, up from 85% in Q2.
Recession risks edged higher as well. The median probability of a downturn within six months stayed at 35%, while expectations of a downturn in the next 12 to 18 months also held steady at 25%. Looking furhter out, however, expectations of a recession in 18 to 24 months rose to 23% from 20%.
Inflation stays anchored while rate expectations hold steady
Inflation expectations barely moved this quarter, with respondents still seeing CPI easing back toward the Bank’s 2% target and holding their year-end 2025 forecast at 2%. The outlook for 2026 and the five-year horizon also remains pinned at 2%, reflecting confidence that inflation pressures are settling.
Expectations for the policy rate are similarly steady, with participants continuing to forecast an overnight rate of 2.25% through the end of 2025 and into early 2026. What has changed is the risk balance: only 3% now believe the next move is more likely to be upward, down sharply from 42% last quarter.
Almost two-thirds say the risks now lean toward a lower rate path, signalling growing confidence in a gentler economic environment.
Forecasts for bond yields ease slightly, pointing to only modest fixed-rate relief
Market participants also trimmed their bond-yield forecasts slightly for the year ahead. The median year-end 2025 estimate for the 5-year Government of Canada yield now sits at 2.70%, down from 2.78% in the previous survey and slightly below the current yield of roughly 2.75%
The 10-year yield forecast among market participants also eased to 3.20% from 3.23%.
Forecasts for 2026 show a similar pattern, with respondents expecting the 5-year yield at 3.00% and the 10-year yield at 3.40%, both modestly lower than the median projections in the second-quarter survey.
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Last modified: November 10, 2025