Money markets are placing significantly higher bets on a Bank of Canada rate cut next week following a softer-than-expected Canadian GDP report this morning as well as a market-friendly inflation reading in the U.S.
The Canadian economy expanded at an annualized rate of 1.7% in the first quarter, missing forecasts, and real gross domestic product likely rose 0.3% on a monthly basis in April, data showed on Friday. The quarterly growth rate was slower than the 2.2% pace forecast by analysts in a Reuters poll, as well as the Bank of Canada’s 2.8% forecast. Fourth-quarter GDP growth was revised to an annualized rate of 0.1% from 1.0% reported initially, Statistics Canada data showed.
The Personal Consumption Expenditures Price Index rose 0.3% in April, in line with forecasts by economists polled by Reuters. In the 12 months through March, PCE inflation gained 2.7%, as expected. Core PCE, which excludes the volatile food and energy components, increased 0.2% last month against expectations of a 0.3% increase. Annually, it was at 2.8%, in line with forecasts.