Canada’s 2025 economic outlook by Scotiabank’s chief economist 

In 2024 Canadians saw the inflation rate cool, and interest rates cut by the Bank of Canada a total of five times. Though many more rate cuts may not be in the cards for 2025, Scotiabank’s Chief Economist Jean-Francois Perrault explains what Canadians are likely to see when it comes to housing and food prices in this new year’s economic outlook.

The Canadian economy should do better overall than it did last year. Lower interest rates will stimulate spending and increase residential investments. At the same time, the GST holiday that started in December and goes until the middle of February will provide an extra boost for households. 

It’s unlikely. We can expect inflation to continue to moderate, but food prices in general are not likely to return to levels seen in prior years. If anything, the threat of tariffs from the incoming U.S. president puts some risk on food prices and the cost of other goods in the next quarters. 

The Canadian dollar is forecast to depreciate to around 68/69 cents by the end of the year as policy rates in the US remain well above those in Canada and the threat of tariffs hangs over currency markets and economies. 

The price should rise. With demand picking up and the cost of borrowing falling, we anticipate that auto prices will rise modestly in 2025, as will the price of other goods in the economy. 

We’re expecting a much stronger performance this year and we already started seeing the housing sector rebound in the last few months of 2024. Lower interest rates mean lower borrowing costs for people and there is a significant pent-up demand of people waiting to buy homes. Another factor that will influence an upswing is the recent changes to the mortgage rules that include raising the cap on insured mortgages from $1 million to $1.5 million.