The Globe and Mail reports in its Thursday, Sept. 1, edition that economists expect another oversized interest rate hike from the Bank of Canada when it makes its monetary policy decision next week. The Globe's Mark Rendell writes that preliminary estimates for July show that GDP declined by 0.1 per cent that month. That suggests third quarter growth is on track to undershoot the central bank's estimate of 2 per cent, on an annualized basis, and could mark a turning point for the Canadian economy after a period of heightened economic activity that accompanied the lifting of pandemic-related restrictions. Canadian Imperial Bank of Commerce economist Andrew Grantham said in a note to clients, "While GDP growth was solid in Q2 as a whole, it was weaker than anticipated and a slow end to the quarter, plus soft start to Q3 suggest that the economy is reacting quicker to rising interest rates than the Bank of Canada may have been anticipating." While rate increases can take six to eight quarters to have a full impact, Wednesday's GDP data show that higher borrowing costs are already squeezing rate-sensitive sectors like housing. Governor Tiff Macklem signalled this month that he intends to keep raising interest rates.
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