Bank of Canada: Economic Playbook Dead as Alberta Faces Crisis

CALGARY, AB — Bank of Canada Governor Tiff Macklem stood before the Empire Club of Canada today and delivered a message that should make every Albertan check their wallet: the economic playbook that carried this country for the past decade is dead.

In a speech titled "Structural change—Canada at a crossroads," Macklem laid out three seismic shifts hammering the Canadian economy right now—U.S. protectionism, the AI revolution, and collapsing population growth. Translation: the ground is moving under our feet, and the Bank's 2.25% overnight rate isn't the only number that matters anymore.

The Friction: Trump's Tariffs Are Still Biting

Start with the trade war. President Donald Trump's tariff blitz that kicked off February 1, 2025—exactly one year and four days ago—jacked the average U.S. tariff rate on Canadian exports from 0.1% to 5.9% by October. That's not ancient history. That's your manufacturing job, your energy sector contract, your cross-border supply chain getting choked in real time.

Canada fired back with retaliatory tariffs, then mostly pulled them by August 22. But the damage lingers. The Canada-United States-Mexico Agreement review is set for July 2026—five months from now—and nobody knows if Trump's team will twist the knife further or back off.

For Alberta, this isn't abstract. Energy exports, ag products, and manufacturing all run through that southern border. When Washington sneezes, Calgary catches pneumonia.

The AI Surge: Big Money, Uneven Gains

Here's the other edge of the blade: artificial intelligence is printing money, but not for everyone. AI-related jobs pumped between $82 billion and $100 billion into the national economy from 2019 to 2024. The Bank projects another $298 billion in cumulative real GDP by 2035.

That's rocket fuel for Toronto and Vancouver tech hubs. But if you're running a small business in Red Deer or working a service job in Lethbridge, the AI boom might as well be happening on Mars. Macklem's central challenge: how does the Bank keep inflation at its 2% target when one sector is overheating and another is flatlining?

The Population Paradox: Fewer People, Slower Growth

Then there's the demographic cliff. Statistics Canada's January projections suggest population growth could go negative in 2025/2026 and 2026/2027 under low-growth scenarios. Ottawa slashed temporary resident targets to 385,000 arrivals for 2026, down from 516,600 in last year's plan. Permanent resident targets stay locked at 380,000 through 2028.

Fewer people means fewer workers, fewer consumers, less demand. GDP growth projections for 2025 and 2026 sit just above 1%—half the roughly 2% pace forecasted in the 2024 Fall Economic Statement. That's not a recession, but it's not prosperity either. It's treading water.

The Money: Rates on Hold, Inflation Ticking Up

The Bank held its overnight rate at 2.25% in both January and December, after cutting it by 25 basis points in October 2025. That followed a long stretch of restrictive rates designed to crush inflation.

Mission mostly accomplished: Canada's annual average inflation hit 2.1% in 2025, down from 2.4% in 2024. But December's headline CPI ticked up to 2.4% from 2.2% in November—higher than the Bank expected. Food inflation hit 4.7% in November, a near two-year high. You're feeling that every time you hit the grocery checkout.

Macklem's tightrope: keep inflation anchored at 2% while the economy navigates Trump's tariffs, AI's disruption, and a shrinking workforce. There's no playbook for this combination.

What Happens Next

The Governor didn't announce new policy tools today. He framed the problem. The Bank's Governing Council—including Senior Deputy Governor Carolyn Rogers and Deputy Governors Sharon Kozicki, Toni Gravelle, Rhys Mendes, and External Deputy Governors Nicolas Vincent and Michelle Alexopoulos—will decide how to respond in coming months.

The CUSMA review in July will set the trade temperature for the next few years. The AI economy will keep accelerating, likely widening the gap between winners and losers. And population growth—or lack of it—will keep dragging on demand.

For Albertans, the stakes are clear: energy exports depend on stable trade access, the labor market needs workers to fill jobs, and every household budget hinges on whether inflation stays tame or breaks loose again.

Macklem called this moment a crossroads. He's not wrong. The question is whether Ottawa and the Bank have the tools—or the will—to steer through it without leaving half the country in the ditch.