The economy's pace of growth significantly outstripped the BoC's predictions
With Q1 economic growth pegged at an annualized 5.6%, along with an expected increase of 0.5% in real GDP from February to March, the Bank of Canada has greater cause to implement another large hike in its overnight interest rate, according to market observers.
New data from Statistics Canada showed that the economy’s pace of growth significantly outstripped the central bank’s latest predictions of a 3% increase in the first quarter of the year. Substantial momentum was imparted by the real GDP increase of 1.1% in February, which was the largest monthly growth rate since March 2021, StatCan said.
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“Broad-based increases across most sectors contributed to the ninth consecutive monthly expansion in economic output,” StatCan added.
“Client-facing industries led the growth on continued reopening of activities and easing of restrictions put in place at the onset of Omicron variant. Increases were also recorded in the manufacturing and construction sectors.”
These trends build the case for the BoC to keep up its forceful rate hike trajectory, said Royce Mendes, head of macro strategy at Desjardins Group.
“The Bank of Canada has set the table for a 50-basis-point hike in June, but data like this will have markets pricing in at least some chance that central bankers need to move more aggressively,” Mendes told Reuters.
