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According to James Smith, developed markets economist at ING, Canada’s latest February GDP figures has justified the Bank of Canada’s (BoC’s) decision to formally remove its tightening bias  at last week’s meeting.

Key Quotes

“Barring a significant fall in monthly GDP for March, the overall first-quarter figure has the potential to come in higher than the BoC’s latest, sharply revised, 0.3% annualised forecast.”

“When it comes to growth, the central bank is squarely focussed on global trade uncertainty, the difficult outlook for the energy sector, as well as concerns surrounding household activity. This is partly why the recent growth trajectory has been lower, but also suggests the near-term growth outlook is skewed to the downside.”

“We aren’t saying that an upside surprise in first-quarter growth would prompt the BoC to inch back towards a more hawkish stance. But it would reinforce our view that a rate cut is unlikely to be delivered this year – something which markets are now gearing up for. We think it’s more likely that the policy rate is maintained at 1.75%, given the scope for some upbeat news on the economic outlook as we enter the second half of the year.”