Bank of Canada developing new AI model to help with economic forecasts: Macklem

Bank of Canada governor Tiff Macklem answers questions from reporters during a press conference at the Halifax Convention Centre on Sept. 21, 2026. Photo by Ryan Taplin /The Chronicle Herald

Article content

Article content

The model, named Prima, was announced on Monday morning as part of central bank governor Tiff Macklem’s speech in Halifax where he warned that the new United States tariffs could slash Canada’s fourth-quarter growth in half.

Article content

Article content

Macklem said the model will help monetary policymakers distinguish between temporary inflation pressures and more persistent ones. It will also help consider alternative scenarios as part of their quarterly economic forecasts.

Article content

Article content

Prima will be used for the first time as the Bank of Canada’s primary forecasting model for its next interest rate announcement and Monetary Policy Report, which is scheduled for Oct. 28.

Article content

Article content

“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 said at a press conference after his speech. “We can use that to go back and look at how it would have performed through key episodes, but we’ll also be using it to forecast going forward.”

Article content

This isn’t the first time the Bank of Canada publicly announced it has adopted AI into its work flows. In 2024, Macklem told attendees of an AI-related conference in Toronto that the central bank uses AI to forecast inflation and economic activity, track sentiment in key sectors of the economy, clean and verify data, and improve efficiency and de-risk central bank operations.

Article content

The central bank’s computer scientists also use AI to accelerate coding and it has its own internal large language model (LLM), a specific type of generative AI that takes a prompt and generates completely new content, but only for language-specific tasks like writing, translating and summarizing.

Article content

Article content

“It’s still early days. We want to make sure we use AI responsibly. We want to make sure there’s human control,” Macklem said Monday when asked about security issues with AI.

Article content

Article content

“When we first started using it, it was okay, but it wasn’t great. It’s getting a lot better as it learns, so that is helping.”

Article content

The Bank of Canada has also talked about AI as a tool to improve economic productivity in Canada, which has been lagging for the past 25 years.

Article content

External deputy governor Michelle Alexopoulos said in a speech in May that AI has the potential to affect productivity, economic growth, employment and inflation, and adoption is spreading quickly.

Article content

In the central bank’s first-quarter Canadian Survey on Consumer Expectations, more than 30 per cent of respondents said they use AI to generate and edit content at work, while almost 25 per cent said they use the technology to analyze data, code or conduct research. A little more than 20 per cent of respondents said they use AI to automate work.

Article content

Statistics Canada data from the second quarter of 2026 said that 19.2 per cent of Canadian businesses had used AI to produce goods or deliver services in the past 12 months, roughly triple the share since the second quarter of 2024. Businesses in information and cultural industries, finance and insurance, and professional, scientific and technical services were most likely to use AI.