Canada's lower-than-expected GDP growth could change Mark Carney's mind about hiking interest rates -

Canada’s lower-than-expected GDP growth could change Mark Carney’s mind about hiking interest rates


As news came in yesterday that Canada’s economy shrank by 0.2 per cent on account of slow mining and manufacturing output, the Loonie took a hit, “trading 46 basis points lower than Friday’s close at US$1.0148,” according to the Financial Post.

Something else was affected, too: the prospect of Bank of Canada head Mark Carney rising interest rates this summer to control a growing appetite for debt—which he sees as the biggest threat to Canada’s economy.

From the Globe:

A surprise dip in gross domestic product suggests the economy has less strength than Bank of Canada policy makers had thought, reducing market expectations for a summer interest-rate hike.

Although, it doesn’t mean it’s guaranteed that rates won’t go up this year. Quoting Doug Porter, deputy chief economist at BMO Nesbitt Burns, the Globe continues:

“The Bank has sent a pretty strong message that they’re not comfortable with rates at current levels,” he said, “so they just need to be convinced that this was a one-month wonder and that the economy is back onto a 2-per-cent-plus growth track, to get them hiking.”

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