OTTAWA, Oct 29 (Reuters) – The Bank of Canada on Wednesday slashed its growth forecasts for both 2025 and 2026, citing the effect of U.S. trade policy, and predicted the economy would recover slightly in 2027.

In its quarterly annual monetary policy report, the central bank said 2025 growth would be 1.2%, sharply down from the 1.8% predicted in January, the last time it released detailed economic forecasts.

It said growth in 2026 would drop to 1.1%, down from the 1.8% forecast in January, before recovering to 1.6% in 2027.

“Roughly half of the downward revision relative to the January report reflects the negative impact of tariffs and uncertainty on potential output,” it said.

“The remainder reflects weaker demand conditions, mainly caused by the negative effect of U.S. trade policies.

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