The GDP report showed the momentum from output gains in April “quickly faded” in May, RBC economist Claire Fan said in a note, with the economy’s excess supply giving it space to grow without worsening inflation pressures.

That points to the Bank of Canada continuing on a rate-cutting path, she said, with a potential further 75 basis points’ worth of cuts on the way before the end of the year.

“Even then, interest rates will still remain at levels high enough to restrict growth in the economy for some time,” she said, “and we don’t expect per-capita GDP will return to positive territory until Q4 this year.”

StatCan’s latest economic indicator arrives shortly after it said inflation came in at a pace of 2.9% last month, marking an unexpected uptick – but one that still leaves the consumer price index (CPI) within the Bank of Canada’s target range of 1-3%.

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