Recent economic data suggests the Canadian economy is running hotter than forecasters had expected, raising concerns about the inflation outlook.
Last week, Statistics Canada reported real gross domestic product grew at an annualized rate of 3.1 per cent in the first quarter, while a preliminary estimate suggests it expanded again in April. Economists -- many of whom expected high interest rates to send the economy into a recession by now -- say the recent data suggests the central bank may have to hike interest rates again to get inflation back to the two per cent target.
The Bank of Canada, which paused its rate-hiking cycle earlier this year after raising its key interest rate to 4.5 per cent, has signalled it would hike rates again if the economy continued to run too hot or inflation proved to be sticky. Canada's annual inflation rate has steadily declined since last summer but ticked up slightly to 4.4 per cent in April.
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