"Some of the indicators are going in multiple directions and so the Bank of Canada will remain cautious evaluating the data after this meeting" next week, for which no action is a "done deal," said Derek Holt, vice president of capital markets economics at Scotiabank. Money markets still expect that the central bank
will hold its benchmark rate at 4.50% at the March 8 policy announcement, and they trimmed bets that it will be forced to tighten again later this year.
The economy contracted 0.1% in December from November, also below analysts' expectations that GDP would be unchanged in the month. Real GDP slowed in 2022 to 3.5% from 5% in 2021, after shrinking 5.1% in 2020 during COVID-19 pandemic restrictions. The Canadian dollar was trading 0.2% lower at 1.36 to the greenback, or 73.53 U.S. cents. Quarterly GDP was dragged down by slower inventory accumulations and declines in business investment in machinery and equipment as well as housing, Statscan said. That offset higher household and government spending and improved net trade, it said. Still, Statscan said the economy likely started 2023 on a stronger footing, with increases in sectors including mining, quarrying, and oil and gas extraction and wholesale trade. The Bank of Canada in January forecast economic growth to be close to zero during the first three quarters of this year, but the central bank will want to wait before ruling out the possibility of another rate hike this year, Holt said. The Bank of Canada "will want to see a whole lot more data before they're convinced that they're either done and/or that they're going to act again," he said.
(Reporting by Ismail Shakil and Steve Scherer; Additional
reporting by Dale Smith in Ottawa and Fergal Smith in Toronto;
Editing by Paul Simao and Mark Porter)
