CAD: Growth momentum supports steady BoC – RBC

Royal Bank of Canada (RBC) economist Abbey Xu reports that Canada's Gross Domestic Product (GDP) grew 0.2% in February, with both goods-producing and services industries contributing as earlier auto-sector disruptions faded. March GDP is seen as essentially unchanged, but indicators suggest momentum held into Q1. Quarterly activity is tracking slightly above forecasts, and Xu expects the Bank of Canada (BoC) to keep rates unchanged through 2026.

Growth resilience underpins policy outlook

"Canada's GDP growth increased 0.2% in February, matching Statistics Canada's advance estimate and our own expectations."

"Looking ahead, the advance estimate for March GDP was "essentially unchanged." Those early estimates are highly revision-prone, but early indicators for March suggest growth momentum has held steady into the end of Q1."

"On a quarterly basis, activity remains broadly consistent with our base case for moderate expansion, with Q1 GDP tracking slightly higher than our own forecast of 1.3% annualized GDP growth, as well as the Bank of Canada's 1.5% projection in its April Monetary Policy Report."

"With population growth slowing, per-capita improvement is expected to continue."

"For the Bank of Canada, our base case remains unchanged: we expect the BoC to hold rates steady for the remainder of 2026, although the central bank signaled at its April meeting that it will be keeping a close eye on the evolution of underlying inflation (ex-energy) measures and broader economic growth implications from higher energy costs due to the ongoing conflict in the Middle East."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)