Economists resume talk of a further interest rate cut following GDP

Almost as soon as Canada’s GDP figures were released economists began talking about the potential requirement for a further cut in interest rates. Recently the Bank of Canada has dismissed the need to lower the rate from the current 0.75 per cent with governor Stephen Poloz confident that the cut made in January had done enough. However with the economy contracting at an annualised rate of 0.6 per cent in the first quarter of this year many are now suggesting that BoC may need to act further.

Growth in non-energy exports is a major factor in offsetting losses from oil exports but as the US economy also contracted in Q1, by 0.7 per cent, those exports may fail to meet the expected levels. Doug Porter of BMO told The Financial Post that there is a 50/50 chance of a further rate cut this year while Emanuella Enenajor of BoA Merrill Lynch is predicting a cut of 25 basis points in October. 
 

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