CAD

The Canadian economy slowed in August and appears to have contracted in September, endangering hawkish expectations for the Bank of Canada’s policy trajectory. Numbers released by Statistics Canada this morning showed real gross domestic product flatlining in month-over-month terms in August, undershooting market expectations – and the agency’s own preliminary estimate – for a 0.2% gain. On a year-over-year basis, activity rose 1.5%, below the expected 1.7%. A number of potentially short-lived factors drove the weakness, but momentum faded nonetheless. A decline in wholesale trade, led by softness in auto sales, was the biggest contributor to the soft headline, followed...

The Bank of Canada launched a pre-emptive strike on inflation this morning, raising borrowing costs by a quarter percentage point in an effort to prevent price pressures from spreading across the economy as the global energy shock rumbles on. A rise in inflation risks played a decisive role. In the official statement setting out the decision to raise the benchmark rate to 2.5%, policymakers said the “conflict in the Middle East is now in its eighth month and there is no clear path to resolution,” and warned “cost pressures are building,” with higher-for-longer energy prices raising input costs and lifting...