CIBC: positive GDP data for third quarter wouldn’t change Bank of Canada’s policy

According to new data, headline growth of Canadian economy in the third quarter turned out to be stronger than expected. But analysts at CIBC still don’t think it will have much impact on the main course of monetary policy pursued by the Bank of Canada. It’s considered that a peak of the interest rate would be reached at the level of 4.25% with a final hike by 50 basis points.

The new data published on Tuesday demonstrated growth of Canadian economy by 0.1% in September on a monthly basis, while a growth rate over the third quarter was noted to be by 0.7%. Thus, the expected estimation of a 0.4% rate was exceeded.

As it was said by the analysts, on the surface it might seem that the economic situation in the third quarter was better than it was initially considered. However, they noted that on closer examination it becomes clear that the economy is actually weaker, as the growth was caused mainly by export and inventory building.

The analysts additionally pointed out the actual decline in domestic demand in comparison with the previous quarter’s result. It was also underlined that a stronger figure of headline growth isn’t likely to be an issue for the Bank of Canada. The analysts still believe that further rate hike shouldn’t be delivered in an amount larger than by 50 basis points, and the rate will probably reach its peak at 4.25%.