Interest rates remain squarely in the crosshairs of market watchers. The latest, very weak, GDP numbers have even casual observers perking up over the prospect of another Bank of Canada rate cut.
The 0.6% contraction in first quarter GDP is significantly worse than forecast, but it was not wholly unexpected. Bank Governor Stephen Poloz had said Q1 GDP would be “appalling”. It was a key reason for the surprise rate cut in January, which Poloz called “insurance” against falling oil prices. Since then oil prices have recovered and the consensus for Q2, although reduced, is brighter.
The BoC’s next policy meeting is on July 15th. While it is going to be much more interesting, the general feeling seems to be that if a cut is coming, it will not be until the October 21st gathering.
Given that Canadians are set to go to the polls in a federal election on October 19th, second quarter GDP and the September 9th policy meeting should also be drawing at lot of attention.