According to analysts, the Bank of Canada (BoC) is expected to keep the interest rates unchanged despite the surprising economic strength.
When compared with the rest of the Western world, the interest rate in Canada is still at record lows... And we all know that such periods of low-interest rates can generate strong economic growth but also pushes inflation higher.
On account of The Bank of Canada (BoC), it is hoped that the economic activity will cool down once the higher costs of borrowing start to kick in!
Just last month, the central bank of Canada became one of the first banks that have pushed their rate hike campaign. At the moment, the interest rate set by the Bank of Canada is 4.50% which is the highest in the last 15 years.
According to the Bank of Canada, there's no change needed in its interest rate policy even if the economy slows down or slips into a slight recession. For the most part, the Canadian central bank is actually expecting a slight case of recession.
If we look at the inflation, it has also cooled down recently so there's no pressure for raising rates as well. Similarly, the economic indicators are also hinting that the Canadian economy has finally started to pick up the pace once again.
In addition, the GDP data for February has increased by 0.3% MoM while January's reading was 0.5% MoM. And March's employment data in Canada also shows a very strong labor market.
At the very basic level, the Canadian economy is gaining momentum while the labor market is also very strong. This means that the income of the Canadian population is rising and more people are working.
Indirectly, this means that the Canadian population has started to spend again which will likely push economic growth higher.