Slowing Growth Increases Hopes of a Rate Cut Pivot in Canada 

Early reports show Canada’s overall economic output (GDP) likely remained flat in March, following February’s modest gain of 0.2 percent. This growth fell short of estimates and follows a downward revision of January’s expansion. Compared to last year, February’s GDP showed a 0.8 percent increase. For March, increases in the utilities and real estate, rental and leasing categories were offset by decreases in manufacturing and retail trade.

Official figures will be released later next month and are expected to show an annualized growth of 2.5 percent in the first quarter. This follows growth of 0.6 percent in the previous quarter, or a slightly stronger 1 percent when considering consumption figures not included in monthly GDP data. The Bank of Canada predicts the economy will pick up steam this year after slowing down in the latter half of 2023, projecting total annualized growth for the latest quarter of around 2.8 percent.

Combined with cooling inflation, expectations are increasing for a rate cut at the next Bank of Canada meeting in June. The central bank has held its benchmark interest rate steady at each of its last six meetings since raising it last July to a more than two-decade high of 5 percent.

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