Canadian Dollar: Growth outlook steady with soft GDP – RBC

Royal Bank of Canada (RBC) economist Claire Fan notes that Canada’s Gross Domestic Product (GDP) contracted in Q1, but measures of excess slack such as the unemployment rate still align with prior tracking. Fan keeps its growth outlook unchanged, instead lowering potential GDP estimates. Policy rates at the Bank of Canada (BoC) and the Federal Reserve (Fed) are seen as appropriate, with both central banks expected to hold through 2026.

Soft GDP but outlook unchanged

"Canada’s gross domestic product contracted in Q1, but indicators for excess economic slack including the unemployment rate remain consistent with our prior tracking."

"We have left our growth outlook unchanged, while passing through weakness to lower potential GDP estimates."

"The Bank of Canada and U.S. Federal Reserve’s current policy rates remain appropriate."

"We’re tracking moderate excess supply in Canada versus excess demand in the U.S."

"Both central banks are expected to hold through 2026 with modest BoC rate increases after, while the Fed remains on the sidelines."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)