-- The Canadian economy still has some gas left in the tank, with robust gains in the first two months of this year, bolstering the Bank of Canada’s case for a patient stance on interest rate cuts.Preliminary data suggest gross domestic product rose 0.4% in February, with broad-based increases led by oil and gas, manufacturing and finance, Statistics Canada reported Thursday in Ottawa.That followed a 0.6% expansion the previous month, beating expectations for a 0.
After the releases, traders shifted bets on a Bank of Canada rate cut in June to about two-thirds, from a three-quarters chance previously. Canada two-year bond yields were up about four basis points on the day to 4.181% while the loonie strengthened slightly to about C$1.357 per US dollar as of 9 a.m. Ottawa time.
Prime Minister Justin Trudeau’s government last week announced plans to reduce the temporary resident population, which is expected to weigh on economic growth over the next three years and help slow shelter price gains.The data clearly suggest there is no urgency for an immediate reduction in interest rates, Andrew Grantham, an economist with Canadian Imperial Bank of Commerce, wrote in a report for investors.
The central bank’s next rate decision is on April 10, when officials will also update their economic projections. Economists widely expect the bank to hold policy rates at 5% again for a sixth straight meeting. When controlling for demographics, the cumulative weakness in per-capita GDP since mid-2022 is similar to what was experienced in the 2008-2009 recession, Jean said.
The manufacturing sector fully recouped December’s decline with a 0.9% increase. Utilities posted its largest growth rate since January 2022 with a 3.2% gain, partly due to a sudden drop in temperatures mid-January in parts of the country.
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