The Bank of Canada has released the results of its Market Participants Survey for the second quarter of 2025, which gathers economic forecasts and risk assessments from approximately 30 financial market participants. The survey was conducted between June 25 and July 3, 2025.

Respondents expect Canada's real GDP growth to remain modest over the next two years. The median forecast for year-over-year GDP growth is 0.8% at the end of 2025 and 1.8% at the end of 2026. Most participants see a higher probability that growth will fall between 0.01% and 2.00%, with a small chance it could exceed that range.

On risks to economic growth, respondents identified easing trade tensions and larger-than-expected fiscal stimulus as top upside risks, each cited by 89% of those surveyed. A stronger housing market was mentioned by 37%. On the downside, an increase in trade tensions was also named by 89%, while weaker consumer spending and a weaker housing market were each noted by 44%.

When asked about current economic conditions, most respondents (84.6%) believe there is a negative output gap—meaning Canadian GDP is below its potential level—while none indicated a positive output gap.

Survey participants assessed the probability of a recession in Canada within various time frames: the median response placed the likelihood at 35% within six months, declining to 20% for an eighteen-to-twenty-four-month horizon.

Expectations for inflation remain close to target levels set by policymakers. The median forecast for annual total CPI inflation is projected at 2.2% for the end of 2025 and at or near 2.0% through both the end of 2026 and five years ahead.

Regarding monetary policy, respondents predict gradual reductions in the Bank of Canada’s policy interest rate over time. The median expectation is for rates to move from 2.75% in July down to around 2.25% by December and into early next year, remaining stable through much of 2026 before edging up slightly in subsequent quarters.

Participants are divided on risks surrounding future interest rates: "Skewed to a higher path" was selected by about 42%, "skewed to a lower path" by roughly one-third, while nearly one-quarter said risks are balanced.

Estimates for Canada’s long-term nominal neutral rate—the theoretical policy rate consistent with stable inflation—clustered around a median value of 2.75%.

Financial asset forecasts suggest Canadian bond yields will stay relatively low through late next year; for example, two-year bond yields are expected to be about 2.50% at year-end, rising only slightly into late-2026.

Oil prices (West Texas Intermediate) are forecasted at US$65 per barrel by year-end and into next year, while projections for the Canadian dollar place it between US$0.74 and US$0.76 over this period.

The Market Participants Survey provides insight into how financial professionals view Canada’s economic outlook as well as their expectations regarding key variables such as growth, inflation, monetary policy settings, and major asset prices.