. Canadian Gross Domestic Product expanded 0.8% QoQ after showing no change in the previous quarter, recording the fastest pace since the second quarter of 2022. Canada's real GDP grew at an annualized rate of 3.1% in the first quarter, following the 0.1% contraction in Q4 2022 and beating the market expectation for an expansion of 2.5%.
rose 4.4% in April, compared with a 4.3% increase in March. On a monthly basis, the CPI was up 0.7% in April, following a 0.5% gain in March.The acceleration in Canada’s headline consumer inflation, combined with a resilient Canadian economy, exerts pressure on the central bank to bring rate hikes back on the table. However, the Bank of Canada is widely expected to hold rates steady at 4.5% at its monetary policy meeting on Wednesday, with markets pricing about a 60% probability of such a move.
"We were in the red zone for risks to further hikes, and this has pushed us to call for an additional 50bps of hikes from here to bring us to 5% on the overnight rate. While market pricing is around 40% chance of a June hike, the reasons we are calling for a hike coupled with the market building towards a hike possibility are exactly why we continue to feel flatteners are the right way to skew,” TDS Analysts added.The Bank of Canada will announce its policy decision at 14:00 GMT.
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