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The Canadian economy has shown encouraging signs of improvement of late and market watchers are now predicting that our fourth quarter GDP will come in higher than expected.
While that would further reduce the odds of a Bank of Canada (BoC) rate cut in the near future, which I’m not betting on anyway, neither is it likely to cause the Bank to consider hiking its policy rate. Our economy still has a significant amount of excess capacity, so while an uptick in growth would be encouraging, we will need to see several more quarters of above-trend growth before the current gap between actual output and our maximum potential output closes (and that is around the time that the BoC would be expected to start raising its policy rate).
In the meantime, there is still plenty of action south of the 49th parallel. To that end, here are five recent observations about U.S. events that are unfolding that will weave their way into our economy’s interest-rate narrative over time: