(May 31) – Economists are ecstatic with this morning’s economic data releases, although they remain split on its implications for interest rates.
BMO Nesbitt Burns chief economist Sherry Cooper says that today’s strong GDP and current account numbers suggest that the Bank of Canada will continue to match the U.S. Federal Reserve Board in any future rate hikes.
Economists at CIBC World Markets essentially agree, saying that growth remains at the top end of the bank’s target range. They anticipate a cumulative 50 basis points in further rate hikes this year.
The dismal scientists at RBC DS Global Markets are a little more sanguine. They say, “Today’s report confirms strong economic momentum in the first half of 2000. Nevertheless, excluding the impact of higher energy prices, domestic prices remain well in hand.” They also expect existing hikes to start biting, concluding, “As such, this report does not change our view that the BoC will stand pat on monetary policy.”
As for the dollar, Cooper concludes that, “the economic news doesn’t get any better.” That doesn’t mean the market will like the loonie, however. CIBC notes that the loonie rallied immediately on the news, “But that rally doesn’t look to have much staying power as long as markets continue to fear that the Bank of Canada will lag behind the Fed in further rate action.”
-James Langton