The Canadian economy is already reaping benefits from interest rate cuts by the Bank of
Canada (BoC). After a miserable first two months of the year when output fell by 0.2% in
January and was flat in February, the 75 basis point (bp) reduction of interest rates is
improving consumer spending and housing activity. The Ivey Purchasing Managers� Index
rose to 64 in March, indicating substantial growth.
Bank of Canada interest rate cuts are helping the economy. The housing market is benefiting from interest rate reductions. The stronger Canadian dollar will inhibit job growth. Retail sales have rebounded, led by interest-sensitive areas.
Auto sales have rebounded recently after cuts in interest rates. External trade should improve, but there is a risk from unexpectedly high US interest rates. Although expected to remain low, there is a substantial risk of higher inflation. The BoC will remain on hold until late this year.
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