Despite another round of health restrictions, preliminary estimates show GDP grew by 0.2 per cent month-over-month in January, Statscan says
Russia’s invasion of Ukraine adds uncertainty to the global economic outlook, making it harder for central bankers to make monetary policy decisions. From a Canadian perspective, however, the war is likely to add to inflationary pressures as global energy and grain prices spike in response to supply disruptions.
Jason Daw, Royal Bank of Canada’s head of North American rates strategy, said that there is little justification for the Bank of Canada to hold off raising its policy interest rate to 0.5 per cent from 0.25 per cent on Wednesday. The GDP numbers published Tuesday bolster that argument, with economic output exceeding the central bank’s fourth quarter projections.
Analysts and investors expect the central bank to hike its policy rate several times in quick succession, bringing the cost of borrowing back to pre-pandemic levels sometime next year. Before the pandemic, the Bank of Canada’s policy rate was at 1.75 per cent.
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