5 things to know from the CIBC 2026 economic outlook on Canada | Daily Hive

5 things to know from CIBC's 2026 economic outlook on Canada

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Despite lingering inflation worries and rate-hike speculation, CIBC says Canada’s economic picture in 2026 may be more stable than markets expect.

CIBC chief economist Avery Shenfeld and deputy chief economist Benjamin Tal shared their views on what lies ahead for Canada’s economy in 2026, from Bank of Canada policy to productivity gains and ongoing housing challenges.

Here are five things to know from CIBC’s Canada 2026 Outlook:

Rate hikes look unlikely in 2026

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While financial markets are pricing in rate hikes for mid-2026, CIBC argues that these expectations are premature. Because interest rates have only recently reached “stimulative territory,” and there is still slack in the economy, Shenfeld says there should be no rush to hike rates.

“A rate hike is likely to be a long way off,” said Shenfeld. “When the Bank of Canada last did a full monetary policy report, they did show a chart that suggested that they had some concern that cost-push inflation could be a source of upward pressure that would take the CPI above its target. In its most recent statement, however, it didn’t seem overly concerned with the inflation outlook.”

Inflation fears appear to be overstated

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High inflation numbers causing those market concerns are likely overstated or misunderstood, CIBC said. Cost-push inflation from U.S. tariffs hasn’t materialized in import data, and the prices for goods from Europe and Asia remain “tame” due to excess capacity in those regions. Tal argued that official rent inflation (5 per cent) is inaccurate, as actual market asking rates are negative.

“I cannot see how rent in Canada is rising by 5 per cent. Given the fact that rent is about 0.7 per cent weight, or basically 7 per cent weight in the basket, it’s not insignificant. So I think that we are inflating the inflation number,” said Tal.

Productivity is the key economic driver

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Recent upward revisions to GDP growth were not caused by an overheating labour market, but by better productivity. CIBC called this a “positive development” because it increases the economy’s non-inflationary “speed limit,” allowing for growth without the immediate need for the Bank of Canada to intervene with higher rates.

“In the first set of data, productivity looked abysmal, looked like it was declining. Now, basically, it’s flat over the last few years. If anything, that helps us on the cost inflation side, better productivity,” Shenfeld said.

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Housing remains the weak spot

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The housing sector is currently the economy’s “weak spot,” described as “broken” and “frozen” by Tal and Shenfeld. “There is no such thing as a housing market in Canada,” Tal stated. “It depends on where you live. Alberta is doing fine. Atlantic Canada is doing fine.”

High costs have led to a trend of what CIBC called “doubling up” (multiple families sharing one household), hiding the full extent of the affordability crisis. While the condo market in Ontario and BC is in a “recession,” economists expect a “de-doubling” process to eventually spur new demand once prices fall another 10 to 15 per cent.

2026 is seen as a transition year

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2026 is viewed as a “transition year” where the first half remains weak, but the second half shows improvement as trade uncertainty, or the “Trump fog,” as Tal described it, clears. This upcoming year will serve as a necessary bridge to 2027, which is forecasted to be a “good year” for construction and economic activity.

“So when it comes to the housing market, I see 2026 as a transition year between a bad situation and a much better situation,” said Tal. “The second half will be better. 2027 will be a good year when it comes to construction. That’s the way I see it.”