Clearer signs of a cooling economy in the second quarter and a weaker July forecast will likely be enough to convince the Bank of Canada to hold rates steady at its meeting next week.
The gross domestic product figures due Friday are the last key input before the central bank’s decision on Sept. 6. Economists in a Bloomberg survey expect June output to shrink 0.2 per cent, this year’s first contraction, ending the quarter with 1.2 per cent annualized growth.
Since the last rate increase on July 12, economic signals have been mixed. Inflation reaccelerated last month after slowing to within the bank’s control range in June and underlying measures remain sticky. If Statistics Canada’s July output estimate points to further softness at the start of the third quarter, the case for the central bank to step to the sidelines would get stronger. On the other hand, better-than-expected growth and clear momentum in domestic demand — especially if driven by consumer spending — are likely to boost the odds of another hike.
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