After a solid two-year run, the Canadian economy might be finally slowing down, growing at an annualized rate of 3.3% in the second quarter (and missing the 4% forecast).
Why it matters: The slowdown shows that rising interest rates are starting to take their toll. The housing market is slowing, credit card debt is rising, and some experts say a recession is becoming increasingly likely.
Economists anticipate that economic growth will continue slowing into the second half of the year, and Bloomberg’s latest readings show the economy contracted by 0.1% in July.
What’s next: Slowing growth probably won’t stop The Bank of Canada’s rate-hiking campaign, but it does make another full percentage point hike next week less likely.
- The Bank has raised rates by 2.25 percentage points since March (and will continue until inflation comes down), so many investors are pricing in another increase.
According to CIBC’s Andrew Grantham, after that, the bank may pause to “reassess how growth and inflation are reacting to this higher interest rate environment.”