Bank of Canada Bets on AI — for Forecasting and for Growth

By the Citi Sighs Intelligence Desk — Toronto, October 3, 2026

TORONTO — Bank of Canada Governor Tiff Macklem has put artificial intelligence at the centre of the country’s economic story — not only as a force reshaping the economy, but as a tool the central bank itself is now using to understand it.

In a Sept. 21 address to the Halifax Partnership, Macklem said rapid advances in AI — alongside re-escalating U.S. trade tensions and demographic shifts — are among the long-term structural forces reshaping how Canadian businesses operate and invest, how people work, and how the economy grows. The speech, titled "Navigating uncertainty and adapting to change," framed AI as both a source of resilience and a source of risk.

The long-run promise: productivity without inflation

Macklem’s core economic argument is straightforward. AI is "a transformative technology with the potential to lift productivity and improve living standards," as he said in remarks earlier this year. In the Bank’s framework, that matters: higher productivity lets the economy grow and lets businesses pay higher wages without pushing up inflation.

The adoption data is moving fast. Citing Statistics Canada figures in Halifax, Macklem said 19.2 per cent of Canadian businesses had used AI to produce goods or deliver services in the previous 12 months as of the second quarter of 2026 — roughly triple the share in the second quarter of 2024. "Businesses are adjusting their supply chains, exploring new markets, investing in new technologies and hiring new workers," he said.

That adaptation is showing up in the numbers. According to Statistics Canada data, the economy grew at an annualized 3.3 per cent in the second quarter; Macklem noted non-energy exports rose 14.5 per cent as firms diversified supply chains, and business investment rose at an annualized 8.8 per cent.

The near-term warning: jobs and prices

Macklem has paired that optimism with warnings about the transition. In a Feb. 5 address to the Empire Club of Canada in Toronto, titled "Structural change — Canada at a crossroads," he cautioned that while AI could lift productivity and living standards, "the transition is unlikely to be painless" — pointing to emerging evidence that AI is reducing entry-level roles in occupations built on routine or repeatable tasks. "That may be boosting youth unemployment," he said.

The inflation picture is equally two-sided. The Bank’s assessment is that AI-driven productivity gains could raise living standards and grow the economy without boosting inflation over the long run — but that in the short term, heavy investment in AI is adding to demand and could itself be inflationary. Macklem has also flagged more pessimistic scenarios, including in September 2024 remarks at a Toronto AI conference, in which AI displaces more jobs than it creates or concentrates market power rather than spreading it.

The Bank is using AI on itself

The central bank is also turning AI inward. In Halifax, Macklem announced Prima, a new AI forecasting model designed to help policymakers distinguish temporary inflation pressures from persistent ones and to test alternative scenarios in quarterly forecasts.

Prima will debut as the Bank’s primary forecasting model at its next interest-rate announcement and Monetary Policy Report on Oct. 28. "No model is going to solve every problem, but we are hopeful that this model will be better suited for a world with more supply shocks and in a more interconnected world," Macklem told reporters after the speech.

This is not the Bank’s first use of the technology. In September 2024, Macklem disclosed that the Bank already uses AI to forecast inflation and economic activity, track sentiment across key sectors, clean and verify data, and reduce operational risk — with computer scientists using AI to accelerate coding and an internal large language model handling writing, translation and summarization.

What it means for rates

The AI debate lands at a delicate moment for monetary policy. The Bank held its policy rate at 2.25 per cent in September, with Macklem emphasizing inflation risks as conflict in the Middle East disrupts energy markets and U.S. tariffs re-escalate.

Macklem’s message to markets: the Bank will not raise rates to fight forces it cannot control — "Monetary policy cannot offset the effects of tariffs or influence global energy prices. What it can do is ensure that global developments do not jeopardize price stability in Canada" — but it will not fall behind if price pressures become entrenched. With the Bank’s federal mandate up for renewal in 2026, Macklem has also confirmed the 2 per cent inflation target itself is not changing: "Faced with a more shock-prone world, the anchor provided by the 2% target looks more important than ever," he said in Montreal in December 2025.

The corridor read

For cross-border investors and founders, the signal is structural, not cyclical. Canadian firms are actively diversifying supply chains beyond the United States, accelerating technology investment, and hunting for skilled talent — the exact conditions under which Canada–Global South corridors (talent, tech partnerships, diversified sourcing) gain strategic value. AI adoption at triple the 2024 pace suggests the productivity story Macklem is telling is already underway in Canadian boardrooms.

What to watch

• Oct. 28 — Bank of Canada rate decision and Monetary Policy Report, the public debut of the Prima forecasting model.
• Youth employment data — the first hard test of Macklem’s warning that AI is compressing entry-level hiring.
• Business AI adoption — whether the 19.2 per cent StatCan figure keeps climbing, and which sectors lead.
• The 2026 mandate renewal — the framework review that will lock in how the Bank handles supply shocks for the next five years.

Sources

• Bank of Canada, "Navigating uncertainty and adapting to change," Halifax Partnership, Sept. 21, 2026
• Bank for International Settlements, remarks by Tiff Macklem, Halifax, Sept. 21, 2026

Bank of Canada, "Structural change — Canada at a crossroads," Empire Club of Canada, Toronto, Feb. 5, 2026

Tiff Macklem, Montreal remarks, Dec. 16, 2025 (via Canadian Press / Investment Executive)

Bank of Canada, AI-conference remarks, Toronto, Sept. 20, 2024

• Tech Newsday, "Bank of Canada governor warns AI could be weighing on youth employment," Feb. 6, 2026
• Canada Inquirer, "Bank of Canada developing new AI model to help with economic forecasts," September 2026
• Morningstar / Dow Jones, "Bank of Canada Grapples With Rate Policy Amid Competing Forces," Sept. 21, 2026
• Investment Executive, "Bank of Canada inflation target won’t change in 2026 mandate review"

Disclosure: This article is for informational purposes only and does not constitute investment advice. All quotations are attributed to their stated sources.